Section D: Financial Information

Transcription

1 The Shearer Statue Section D: Financial Information This section provides the Financial Strategy, details on the financial implications of the Plan, including estimated expenditure, revenue and public debt over the ten year term, and the Funding Impact Statements. Creating a better future with vibrant communities and thriving business. 84

2

3 Financial Strategy CONTENTS OF THIS STRATEGY 1.0 Purpose 1.1 Guiding Principles 2.0 STRATEGIC Context 2.1 Population and Land use 2.2 Affordability and the provision of Public Services 2.3 External Influencers 2.4 The Past 3.0 council s planned financial future 3.1 Maintaining and Delivering Services (Operating Expenditure) 3.2 Capital Expenditure 3.3 Revenue Streams 4.0 financial parameters 4.1 Limits on Rates and Rates Increases 4.2 Limits on Borrowing 4.3 Debt Reduction 4.4 Council s Policies on giving securities on its borrowing 4.5 Financial Investments and Equity Securities 4.6 Funding Depreciation 1.0 Purpose The purpose of the Financial Strategy is to set out Council s strategic financial direction over the period and how it plans to manage its financial performance over the next ten years. In essence the financial strategy establishes a financial endpoint or destination for Council to work towards and provides some defined parameters to guide the Council in its journey. The financial strategy is an essential element of the Long Term Plan. Council must be financially sustainable to continue delivering quality services while keeping rates affordable, ensuring equity between current and future generations and sharing the costs of services across users in a fair and equitable manner. This financial strategy is designed to provide an understanding of the Council s current financial position, the main factors that influence the cost and demand for Council services, the financial challenges Council is likely to face and Council s proposed financial direction. 1.1 Guiding Principles The Financial Strategy needs to consider financial health and robustness as well as the needs of the community. Both these considerations are important from a sustainability perspective. The guiding principles underpinning the Financial Strategy are that Council will strive to: a) Provide amenities, facilities and services to the District community that contribute to and align with Council s vision b) Undertake good asset stewardship and management to ensure all community and infrastructure assets are fit for purpose and available for future generations c) Maintain affordable rates increases to deliver the services and facilities required by the community d) Ensure financial sustainability - by ensuring that our revenue is sufficient to cover an efficient operating expense base, all funding sources are being used optimally and financial management is prudent. 2.0 STRATEGIC OBJECTIVES 2.1 Population and land use changes Planning Assumptions for the LTP show that the annualised population of Waitomo District as a whole will decline by 0.5% per year over the period. Projections are that the district population will decrease by 557 persons, to a population of 8,743, over the life of the LTP. This represents a 5.9% decrease over 10 years (medium projection and median stochastic). The primary cause of the declining population is net migration loss. However, not all of the census areas within the Waitomo district showed a decline in previous years. Between the 2001 and 2006 census 5 out of 8 census units showed an increase or no change. However, this dropped off between 2006 and 2013, when only 2 areas, Taharoa and Waipa Valley, showed an increase in population. It is also projected that the current pattern of limited subdivision and building development will continue over the 10 year period placing little additional demand on Council provided services. Population and development projections are important in the context of rating and rates affordability. Whilst a static or declining population does not necessarily translate to a reduction in the number of rateable properties (the number of rateable properties in the Waitomo District has increased in spite of a declining population) it can impact on a community s ability to pay and could exacerbate affordability concerns which Council will need to carefully manage. 2.2 Affordability and the provision of Public Services Council has been careful to invest in infrastructure upgrades where essential to give effect to minimum public health and environmental standards. Recent investment has been focused on meeting minimum standards for compliance reasons. Whilst a projected decline in population is of concern in terms of affordability, there is little or perhaps no scope to scale back Council s involvement in the provision of core infrastructure. The Water Supply and Sewerage Networks have been designed to what can be termed the minimal standards required for a municipal supply in New Zealand under current legislation and regulation. A planned for bi-product of Council s investment in its core infrastructure over the past few years is that there is currently enough capacity in the network infrastructure for nominal growth in areas where it should occur. Asset renewals are the only areas that Council can respond to in relation to the projected decline in population and static growth forecasts. With the exception of the Piopio wastewater scheme and the Benneydale water supply scheme, the remaining networks are characterised by ageing reticulation infrastructure. It is important in that context that long term asset renewal strategies take account of actual asset condition, optimising lifecycle costs, and ratepayer affordability without compromising public health and environmental outcomes. 86

4 The sealed and unsealed road network is currently in reasonable condition as a result of current investment in maintenance, rehabilitation and reseals. Again, current levels of service are considered to be a minimum in terms of an effective, efficient and safe local roading network. Many of the other public services provided by Council (particularly in the areas of Regulation and Safety, Resource Management and Solid Waste) are also governed by legislation, Regulation and Industry Standards and as a result there are limited options for changes to scale and scope in response to changes in population and development. The provision of community services such as Parks and Reserves, Recreation and Culture, Community Development and other Public Amenities are the very services that make communities desirable in terms of a place to work, live and play. In this 10 year period, Council aims to focus on community and economic development in order to attract more residents and visitors to the District. In short, a retraction or reduction in scope of desirable public services would work against the Council s vision of Creating a better future with vibrant communities and thriving business. 2.3 External Influencers It is important to note that the projected population forecasts provided by the National Institute of Demographic and Economic Analysis (NIDEA) project a medium case scenario drawing on past fertility, mortality and migration trends. The projections provide one of a number of planning assumptions which attempt to gain an understanding of what the Waitomo Community might look like during the planning horizon of the LTP. The projected decline in population does not take into account other factors that may well influence the future look and feel of the Waitomo Community (like Central Government policy, global and national trends) and the effective delivery of Councils own strategies can and will influence the make-up of the Waitomo Community over time. Factors such as housing affordability in metropolitan areas, an improved national state highway network, public transport, Central Government strategies around regional development and Local Government s efforts in the provision of public services and community development could well see the smaller regions being more desirable places to live and work, in the future. All other factors detailed in the Planning Assumptions for the LTP have been taken into account in the development of this Financial Strategy. 2.4 The Past When considering the future it is helpful to look back and see where we have come from. Reviewing past plans and understanding what has actually occurred provides context for understanding Council s intentions for the future, both in a financial and non-financial sense. Council s direction has been relatively consistent over the past seven years. This direction has been about the consolidation of service delivery on a financially sustainably basis. It has also been about improving the condition of its assets, where this has been essential in order to support public health outcomes and to meet its Resource Consent and other legislative requirements. In the period since , WDC has invested approximately $68 million in its capital works programme. Some key works completed during this period are: Infrastructure Construction of raw water storage dams at Mokau Disinfection upgrades completed for Mokau and Benneydale water supplies Te Kuiti Water Treatment Plant upgrade (underway) Te Kuiti Wastewater Treatment Plant upgrade Piopio sewerage system build Critical Stormwater renewal work in Ngati Street, George Street and Duke Street 4000 metres (linear) of Stormwater reticulation system cleaned and surveyed Construction of the Transfer Station located at Waitomo District Landfill Development of an additional cell at Landfill site Structural metal placed on 42 kms of unsealed roads. Community Services Replacement of playground equipment Te Kuiti Railway Buildings (underway) Upgrades to the Waitomo Arts and Cultural Centre Toilet block upgrades Renewal and upgrade work for elderly persons housing in Te Kuiti All this has been completed within prudent financial management parameters. The following extract from Council s Summary Annual Report for the year ended 30 June 2014 demonstrates how dedicated and prudent financial management over time has resulted in Council being in a stronger financial position. Summary Statement of Financial Position as at 30 June 2014 Current ASSETS Current Liabilities Net Working Capital Non- Current ASSETS Non- Current Liabilities Actual 2014 ($000 s) Budget 2014 ($000 s) Actual 2013 ($000 s) 6,316 6,831 5,878 4,563 10,023 18,091 1,753 (3,192) (12,213) 323, , ,776 45,945 45,814 33,038 Equity 279, , ,525 The public debt has been reducing over the last three years and actual debt requirements have been considerably lower than forecast. This is despite a significant investment programme ($32 million) having been completed over the same period. Council has been able to fund that investment programme through subsidies and available cash whilst reducing its public debt levels at the same time. 87

5 30 June Public Debt Forecast Public Debt (LTP s) Actual Public Debt $ Difference from Forecast 53,123,000 48,086,000 49,890,000 47,005,000 45,182,000 44,865,000 (6,118,000) (2,904,000) (5,025,000) The following graph shows Council s forecast levels of operating expenditure over the period. Roads and Footpaths, 35% Operational Expenditure ($302.3M) Governance, 10% Community Development, 5% Community Service, 14% % Reduction (since 2012) -3.9% - 4.6% Water Supply, 11% Regulation, 3% Solid Waste Management, 7% 60,000,000 Resource Management, 1% Sewerage, 12% Stormwater, 2% 50,000,000 40,000,000 30,000,000 20,000,000 10,000, Forecast Public Debt (LTPs) Actual Public Debt Forecast Reserves (LTPs) Actual Reserves 3.2 Capital Expenditure The inflated 10 year Capital Plan for period includes $95.1 million of capital works most of which is related to renewals. Some improvements mostly related to risk mitigation and for environmental reasons have also been planned over the 10 years. 3.0 council s planned financial future As above Council has been on a journey towards financial sustainability and in the recent past has focused on restoring the Council organisation to better financial health whilst focusing on ensuring core infrastructure is in good shape to meet environmental and public health standards into the future. Roads and Footpaths, 68% Capital Expenditure ($95.1M) Governance, 6% Community Services, 5% The hard work of Council and the community over the last few years are now starting to pay some dividends. With a solid infrastructure platform in place, a strengthening balance sheet and income levels restored to appropriate levels Council is now in a position to turn its attention to other important needs of the District. It has been the intention of Council for some time to turn its attention to community well-being aspects once a stable and sustainable core infrastructure and financial platform was in place. This realignment does not mean a substantial overall increase in investment in financial terms, it represents the next step in Council s journey and Council intends to make incremental gains. 3.1 Maintaining and Delivering Services (Operating Expenditure) As above the key focus for the plan is to ensure services delivered are affordable and that these meet the current and future needs of the District and its population whilst investing in community development and growth opportunities. Water Supply, 11% Sewerage, 5% Community Development, 0% Solid Waste Management, 2% Stormwater, 3% As part of the development of the LTP, Council has developed an Infrastructure Strategy (IS) covering a planning period of 30 years ( ), which outlines how Council intends to manage its Water Supply, Wastewater, Stormwater and Roads and Footpath infrastructure assets. In essence, the Strategy asserts that asset maintenance and upgrades and essential elements of prudent asset management will continue to form a vital part of Council s future planning. Service levels for core services are not expected to change in any significant way over the life of this Long Term Plan other than in response to changing public health and environmental standards. Other service level movements are generally in support of economic and community development. 88

6 3.3 Revenue Streams Sources of funding for the planned services and operations in the period are shown in the graph below. Value in $000's 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Where The Funds Come From ($397.4M) Loans Reserves Rates Other Income (incl Subsidies) a. Smooth rate increases by running activity deficits/ surpluses or repaying activity deficits. b. Use operational reserves and/or activity balances to fund some specific operational expenditure where appropriate. Council considers this to be a prudent approach to financial management in that it provides for assets to be maintained and renewed, debt levels kept reasonably conservative, and rate increases limited to an affordable level now and in future. The graph below shows the proposed rate levels over the period and tests them against the self-imposed cap of 4.71%. The Graph shows that Council s forecast rate increases are substantially lower than previous forecasts. The limit on rates increases has also been reduced for the future forecast period from the 7.7% limit established in the LTP. LTP Forecast Rate increases 4.0 Financial parameters 4.1 Limit on Rates and Rates Increases Council recognises the need to keep rates sustainable and increases affordable over time and will endeavour to keep the income required from rates steady as well as creating predictability in the level of rates required. Rate Increases (%) 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2012/ / / / / / / / / / / / /25 Year Council s strategies for achieving affordability of rates include: Limiting the level of rates income to a percentage of operating expenditure. Providing flexibility for individual local communities to pay more for additional projects and/or services. Managing costs through efficiency gains and increasing other revenue sources e.g. user fees and charges, subsidies. Council has set the following limits on rates revenue and rates increases for the period. Total rates revenue will be limited to an average of 75% of total operating expenditure Total rate increases will be limited to a cap of LGCI + 2% (4.71% based on LGCI average over 10 years) The limit on annual rate increases (both by type and overall) will not apply where there is an increase in the existing level(s) of service (LoS) of any activity in consultation with the community. This exclusion includes unforeseen events that may occur during the period of the plan. Over the life of the LTP, Council s objective is to set total operating income at a level to meet total operating expenditure. This is to ensure that there is access to enough funding to enable the services to continue to be provided long term. 4.2 Limits on Borrowing Budgeted rates increase (at or within limit) External borrowing (Public debt) is used by Council to fund assets or services that will provide benefit well into the future. This is in accordance with the principle of intergenerational equity. However, the use of borrowing has to be prudent and sustainable and limited to the ability to service and repay the debt. Council approves borrowing by resolution through the Annual Plan or the Long Term Plan (LTP) process. Council recognizes the need to manage its finances in a sustainable and affordable manner and has therefore established borrowing parameters to ensure that investment priorities are carefully managed and within the reach of the Waitomo Community. Council has set the following borrowing limits in its Treasury Policy: Total interest expense will not exceed 15% of total revenue. Total borrowings will not exceed 25% of total equity Total borrowings must not exceed 20% of total assets Net debt will not exceed 170% of total [cash] revenue Net interest will not exceed 20% of annual rates Council is forecast to be well within these limits in the period. However, there are activities where this approach may not be practical or prudent on a year-by-year basis due to the activity s long term nature, e.g. wastewater, roads and footpaths, water supplies. Over the next ten years Council intends to: 89

7 Total Rates as a % of Total Opex (Limited to an average of 75%) $000 s 2015/ / / / / / / / / /25 Total OPEX 26,793 27,642 28,563 29,021 29,747 30,575 31,421 32,021 32,977 33,549 Forecast Rates 18,528 19,268 20,015 20,796 21,623 22,396 23,237 23,890 24,356 24,665 Forecast Rates as % of OPEX 69.2% 69.7% 70.1% 71.7% 72.7% 73.2% 74.0% 74.6% 73.9% 73.5% Total Borrowings/Total equity (%) 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Total Borrowings to Total Equity (%) 2015/ / / / / / / / / /25 Year All dividend and/or subvention income from its subsidiary company (Inframax Construction Ltd) will be used to repay debt and not used to offset rates required in any year of the LTP. Another important consideration in the first three years of the planning period will be an assessment of the existing Investment Portfolio to better accommodate risk potential and how to optimise a return on investments for the District community. Public Debt and Movement in Reserves 4.3 Debt Reduction Budgeted debt (at or within limit) Quantified limit on debt (25%) Reducing external debt is a key consideration of this Financial Strategy and Council is committed to this endeavour over the period in order to reduce the debt servicing burden on the District community and to enable deployment of resources for the development of the District and the facilities available. Value in $000's 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, / / / / / / / / / /25 Public Debt Reserves In the LTP, Council agreed to levy an additional and separate rate uniformly across all properties, starting in 2015, the revenue from which would be used for the repayment of debt. Since that time (in the last 3 years), Council s financial performance has progressed significantly. Retained earnings have increased from $192 million in 2011/12 to $200 million in 2013/14. Debt has been reducing over the same period despite a significant investment programme of $32 million (since 2011) having been undertaken. This has been the result of Council s multi-pronged approach of improving its Reserves balance, efficiency in spending, reducing cost of finance and a focus on increasing operating income where possible. Council s forecast for the period is to borrow minimally for essential capital works and to develop over time a strong capacity to self-fund the cost of asset renewal wherever practicable. The forecast is to grow Reserves balances over the planning period and Council will utilise these to reduce external debt requirements and to pay down debt. This is forecast to start in Year 3 of the planning period (trend analysis shows that this is already underway). Council s plans for reducing external borrowing as set out in this strategy by growing and optimising utilisation of Reserves balances shows forecast public debt to decrease $21.0 million over the period to $33.7 million in year 10. The borrowings costs per rateable property are forecast to reduce by 19% over this period Total interest Cost per Rateable Property / / / / / / /25 Total interest Cost per Rateable Property Given the trend analysis and the forecasts, Council considers that appropriate and required funding of reserves, and their redeployment is an effective Debt Reduction Strategy and that the use of a new separate debt repayment rate over and above the current liability management approach is not required and would only alter the forecast overall debt position by a minimal amount. 90

8 4.4 Council s policies on giving Securities on its Borrowing Council borrowings are secured over annual rates on every rateable property within the Waitomo District. Under the Debenture Trust Deed, the Council offers deemed rates as security for general borrowing programmes. From time to time, security may be offered over specific assets with Council approval or infrastructural assets where special rating provisions apply. Council will not borrow, underwrite or guarantee loans on behalf of any other person, association or organisation. The 2008 amendment of the Securities Act 1978 (s.5a- 5D) enabled Council to issue debt securities to raise funds for Capital Investment. Any issue of debt securities must be approved by Council and will be in compliance with the Securities Act Securities are not provided for Councils own internal borrowing. 4.5 Financial Investments & Equity Securities Council is a risk adverse entity and therefore takes a prudent approach to managing its investments. Council seeks to achieve an acceptable rate of return on all its investments but recognises that as a responsible local authority any investments that it does hold will be low risk and that generally lower risk means lower returns. Council seeks to maintain diversity in its investment portfolio to spread and minimise risk. Prior to making new strategic or equity investments Council will, on a case-by-case basis, take into consideration: a. The expected financial return. b. How the investment will contribute in furthering the Waitomo District s Community Outcomes as documented in the Long Term Plan. 4.6 Funding of Depreciation Depreciation cost is a substantial part of the total rates requirement over the 10 year planning period. In keeping with its focus on prudent financial management and ensuring that rates are affordable and sustainable, Council proposes the following with regard to funding of depreciation: 1. To fund depreciation for Community Halls and Housing for Elderly Fund only to the extent required for minor renewals. This is because Council considers that future renewals would be from community sources and/or grants and subsidies. These facilities are community occupied, have a life in excess of 50 years and renewals would be dependent on future choices. 2. To defer depreciation on some newly built assets for the first 4-5 years of the asset life and fully recovering that unfunded depreciation in the following years. Council has primarily considered this from an affordability perspective for the current ratepayers. Council considers this fair and equitable since the current ratepayers are carrying the debt servicing costs anyway. 3. Fund depreciation on some brand new assets only to the level required to meet annual loan repayments because Council does not intend to build up surplus depreciation reserves in the initial three years on brand new assets with extended lives and low risk of failure. In making these proposals (pursuant to section 100 (2) LGA 2002), Council has considered the overall impact of its financial management policies, levels of service and ensured the cash flow is positive over the life of the plan (excluding major projects). Council considers that the above approach to depreciation is not likely to lead to a deferred burden on future rates caused by deferred depreciation funding as is evident from the forecast rates increase over the 10 year period (which is consistent). c. The existing investment portfolio and how the proposed investment fits in terms of Council s preference to spread and minimise risk. d. Any other consideration Council deems appropriate. The Council may invest in shares and other financial instruments of the New Zealand Local Government Funding Agency Limited (LGFA), and may borrow to fund that investment. The Council s objective in making any such investment will be to: Obtain a return on investment; and Ensure that the LGFA has sufficient capital to become and remain viable, meaning that it continues as a source of debt funding for Council. Details on how Council manages its investments and liabilities are set out in Council s Treasury Policy which is publicly available. 91

9 Summary of Estimated Revenue and Expenses Statement $000 s Operating Income Community and Cultural Sustainability Environmental Sustainability Economic Sustainability Total Operating Income EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR ,799 1,566 1,518 1,553 1,791 1,844 1,898 1,962 2,026 2,098 2,172 1,998 1,903 1,948 2,004 2,048 2,113 2,165 2,242 2,315 2,405 2,503 6,772 7,697 7,134 7,420 7,711 8,034 8,390 8,755 9,158 9,601 10,054 10,569 11,166 10,600 10,977 11,550 11,991 12,453 12,959 13,499 14,104 14,729 Operating Expenditure Community and Cultural Sustainability Environmental Sustainability Economic Sustainability Total Operating Expenditure 8,387 8,906 9,122 9,295 9,249 9,449 9,742 9,968 10,169 10,554 10,691 5,769 5,861 5,904 6,140 6,263 6,393 6,570 6,811 6,861 6,995 7,106 11,887 12,026 12,616 13,128 13,509 13,905 14,263 14,642 14,991 15,428 15,752 26,043 26,793 27,642 28,563 29,021 29,747 30,575 31,421 32,021 32,977 33,549 Net Operating Cost/ (Surplus) 15,474 15,627 17,042 17,586 17,471 17,756 18,122 18,462 18,522 18,873 18,820 Capital Expenditure Community and Cultural Sustainability Environmental Sustainability Economic Sustainability Total Capital Expenditure 2,047 1,692 1, , ,602 1, ,951 11,329 7,589 6,448 6,671 6,770 6,881 7,059 7,317 7,546 7,810 10,838 13,901 10,034 8,197 8,138 9,063 9,360 8,616 8,972 9,295 9,556 Net Expenditure 26,312 29,528 27,076 25,783 25,609 26,819 27,482 27,078 27,494 28,168 28,376 Funded By External Loans Internal Loans 3,451 5,591 2,587 1, ,575 1, Reserves 4,823 5,409 5,221 4,745 3,921 3,621 3,467 3,068 2,811 3,009 2,838 General Rates 3,373 3,434 3,624 3,684 3,810 3,924 4,054 4,263 4,412 4,514 4,617 UAGC 3,116 3,158 3,257 3,314 3,421 3,516 3,632 3,777 3,935 3,988 4,087 Targeted Rates 11,549 11,936 12,387 13,017 13,565 14,183 14,710 15,197 15,543 15,854 15,961 Total Funding 26,312 29,528 27,076 25,783 25,609 26,819 27,482 27,078 27,494 28,168 28,376 Depreciation and Amortisation 6,105 5,641 5,913 5,874 6,154 6,357 6,551 6,907 7,131 7,425 7,649 92

10 Summary of Estimated Revenue and Expenses Statement for Community and Cultural Sustainability EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 $000 s Operating Income Leadership Community Service Community Development Regulation Total Operating Income 1,799 1,566 1,518 1,553 1,791 1,844 1,898 1,962 2,026 2,098 2,172 Operating Expenditure Leadership 2,875 2,804 2,935 3,071 2,855 2,927 3,097 3,039 3,129 3,320 3,258 Community Service 3,731 3,988 4,015 3,981 4,091 4,181 4,253 4,402 4,483 4,563 4,689 Community Development 1,097 1,247 1,318 1,315 1,368 1,423 1,464 1,550 1,566 1,627 1,683 Regulation ,044 1,061 Total Operating Expenditure 8,387 8,906 9,122 9,295 9,249 9,449 9,742 9,968 10,169 10,554 10,691 Net Operating Cost/(Surplus) 6,588 7,340 7,604 7,742 7,458 7,605 7,844 8,006 8,143 8,456 8,519 Capital Expenditure Leadership Community Service Community Development 1,364 1,184 1, Regulation Total Capital Expenditure 2,047 1,692 1, Net Expenditure 8,635 9,032 9,175 8,734 8,227 8,296 8,772 8,780 8,990 9,369 9,441 Funded By External Loans Internal Loans Reserves 1,204 1,329 1,230 1, General Rates 3,295 3,366 3,551 3,604 3,734 3,858 3,984 4,191 4,331 4,431 4,539 UAGC 2,890 3,007 3,099 3,147 3,257 3,360 3,471 3,612 3,758 3,808 3,912 Targeted Rate Total Funding 8,635 9,032 9,175 8,734 8,227 8,296 8,772 8,780 8,990 9,369 9,441 Depreciation and Amortisation 1,098 1,154 1,217 1,052 1,104 1,103 1,084 1,178 1,240 1,302 1,367 93

11 Summary of Estimated Revenue and Expenses Statement for Environmental Sustainability EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 $000 s Operating Income Solid Waste Management 1, ,002 1,027 1,037 1,067 1,079 1,113 1,140 1,181 1,225 Stormwater Resource Management Sewerage ,034 1,077 1,122 1,173 Total Operating Income 1,998 1,903 1,948 2,004 2,048 2,113 2,165 2,242 2,315 2,405 2,503 Operating Expenditure Solid Waste Management 1,793 1,956 1,987 2,049 2,074 2,117 2,239 2,366 2,392 2,440 2,464 Stormwater Resource Management Sewerage 3,400 3,244 3,288 3,415 3,506 3,590 3,623 3,682 3,697 3,758 3,859 Total Operating Expenditure 5,769 5,861 5,904 6,140 6,263 6,393 6,570 6,811 6,861 6,995 7,106 Net Operating Cost/(Surplus) 3,771 3,958 3,956 4,136 4,215 4,280 4,405 4,569 4,546 4,590 4,603 Capital Expenditure Solid Waste Management Stormwater Resource Management Sewerage Total Capital Expenditure 1, ,602 1, Net Expenditure 5,611 4,838 4,830 4,893 4,913 5,882 5,956 5,352 5,354 5,426 5,427 Funded By External Loans Internal Loans 1, Reserves 876 1,290 1, General Rates UAGC Targeted Rates 3,271 3,373 3,498 3,730 4,032 4,305 4,480 4,670 4,702 4,774 4,743 Total Funding 5,611 4,838 4,830 4,893 4,913 5,882 5,956 5,352 5,354 5,426 5,427 Depreciation and Amortisation 1,270 1,059 1,077 1,090 1,109 1,121 1,188 1,250 1,263 1,275 1,288 94

12 Summary of Estimated Revenue and Expenses Statement for Economic Sustainability $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Operating Income Water Supply Roads and Footpaths Total Operating Income ,985 6,913 7,127 7,412 7,703 8,026 8,382 8,746 9,149 9,592 10,044 6,772 7,697 7,134 7,420 7,711 8,034 8,390 8,755 9,158 9,601 10,054 Operating Expenditure Water Supply Roads and Footpaths Total Operating Expenditure 2,587 2,423 2,939 3,179 3,239 3,311 3,389 3,445 3,518 3,591 3,639 9,300 9,603 9,677 9,949 10,270 10,594 10,874 11,197 11,473 11,837 12,113 11,887 12,026 12,616 13,128 13,509 13,905 14,263 14,642 14,991 15,428 15,752 Net Operating Cost/(Surplus) 5,115 4,329 5,482 5,708 5,798 5,871 5,873 5,887 5,833 5,827 5,698 Capital Expenditure Water Supply Roads and Footpaths Total Capital Expenditure 1,688 5,514 1, ,263 5,815 5,897 6,031 6,176 6,334 6,508 6,694 6,897 7,118 7,351 6,951 11,329 7,589 6,448 6,671 6,770 6,881 7,059 7,317 7,546 7,810 Net Expenditure 12,066 15,658 13,071 12,156 12,469 12,641 12,754 12,946 13,150 13,373 13,508 Funded By External Loans Internal Loans Reserves General Rates UAGC Targeted Rates Total Funding Depreciation and Amortisation ,276 4,690 1, ,743 2,790 2,889 2,808 2,770 2,646 2,490 2,423 2,294 2,292 2, ,861 8,095 8,388 8,744 9,007 9,329 9,661 9,909 10,212 10,419 10,528 12,066 15,658 13,071 12,156 12,469 12,641 12,754 12,946 13,150 13,373 13,508 3,737 3,428 3,619 3,732 3,941 4,133 4,279 4,479 4,628 4,848 4,994 95

13 Prospective Statement of Financial Position as at 30 June $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Equity Retained Earnings 204, , , , , , , , , , ,928 Council Created Reserves Available for Sale Reserves 3,656 4,290 3,264 2,542 2,596 3,145 3,977 5,459 7,303 9,210 11, ,604 2,604 2,604 2,604 2,604 2,604 2,604 2,604 2,604 2,604 Hedging Reserves (150) Revaluation Reserve 68,383 70,465 73,776 78,507 78,507 96, , , , , , , , , , , , , , , , ,692 Current Assets Cash Other Financial Assets Inventory Debtors (Exchange) Debtors (Non exchange) 5,481 4,978 5,102 5,237 5,381 5,536 5,700 5,879 6,073 6,287 6,516 Assets Held for Sale ,978 5,461 5,593 5,737 5,890 6,054 6,229 6,419 6,625 6,853 7,097 Current Liabilities Creditors (Exchange) 3,594 3,490 3,575 3,673 3,774 3,883 4,000 4,127 4,263 4,411 4,572 Current Borrowings 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 Provisions Employee Entitlements Derivative Financial Instruments Net Working Capital 9,558 9,383 9,481 9,592 9,708 9,833 9,966 10,111 10,267 10,437 10,621 (3,580) (3,922) (3,888) (3,855) (3,818) (3,779) (3,737) (3,692) (3,642) (3,584) (3,524) Non Current Assets Property, plant & equipment 327, , , , , , , , , , ,866 Intangible Assets Forestry Assets Investment property Assets Held for Sale Other Financial Assets Other Financial Assets - Shares in CCO s + NZLGIC Derivative Financial Instruments ,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2, , , , , , , , , , , ,803 Non Current Liabilities Creditors (Exchange) Borrowings 48,795 47,634 49,428 48,445 46,931 45,476 43,716 40,349 36,539 32,642 28,451 Employee Entitlements Provisions ,006 1,031 1,056 Derivative Financial Instruments ,504 48,897 50,594 49,514 47,903 46,475 44,742 41,402 37,619 33,750 29,587 Net Assets 276, , , , , , , , , , ,692 96

14 Prospective Statement of Comprehensive Revenue and Expenses $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Revenue Subsidies 6,865 7,484 6,890 7,169 7,454 7,771 8,120 8,478 8,872 9,306 9,748 Investment Revenue Rates & Rates Penalties 17,749 18,305 19,026 19,767 20,535 21,348 22,108 22,935 23,569 24,017 24,308 Metered Water Rates Fees & Charges 3,233 3,203 3,223 3,335 3,415 3,521 3,612 3,737 3,860 4,005 4,156 Gains/Losses on Investment Properties Total Revenue 28,607 29,694 29,868 30,992 32,346 33,614 34,849 36,196 37,389 38,460 39,394 Expenditure Employee Benefits 4,117 4,575 4,671 4,767 4,868 4,973 5,088 5,212 5,344 5,487 5,633 Depreciation & Amortisation 6,105 5,641 5,913 5,874 6,154 6,357 6,551 6,907 7,131 7,425 7,649 Finance Costs 3,102 3,009 3,301 3,544 3,480 3,396 3,300 3,187 2,969 2,724 2,472 Other Expenditure 12,717 13,568 13,757 14,378 14,519 15,021 15,636 16,115 16,577 17,341 17,795 Total Expenditure 26,041 26,793 27,642 28,563 29,021 29,747 30,575 31,421 32,021 32,977 33,549 Surplus/(Deficit) before Tax 2,566 2,901 2,226 2,429 3,325 3,867 4,274 4,775 5,368 5,483 5,845 Other Comprehensive Revenue and Expense Gains/(Losses) on Revaluation of Property,plant and equipment 0 0 3,311 4, ,557 7, ,007 14,582 0 Total Comprehensive Revenue and Expense for the Year 2,566 2,901 5,537 7,160 3,325 21,424 12,063 4,775 31,375 20,065 5,845 97

15 Prospective Statement of Changes in Net Assets/Equity $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Opening Balance 273, , , , , , , , , , ,847 Revaluation of Property, plant and equipment 0 0 3,311 4, ,557 7, ,007 14,582 0 Net income Recognised Directly in Equity 0 0 3,311 4, ,557 7, ,007 14,582 0 Net Surplus/(Deficit) for the Year 2,566 2,901 2,226 2,429 3,325 3,867 4,274 4,775 5,368 5,483 5,845 Total Recognised Income for the years ended 30 June 2,566 2,901 5,537 7,160 3,325 21,424 12,063 4,775 31,375 20,065 5,845 Closing Balance 276, , , , , , , , , , ,692 98

16 Prospective Cashflow Statement for the years ending 30 June $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Operating Activities Rates & Rates Penalties 20,880 21,718 22,453 23,318 24,217 25,169 26,063 27,032 27,781 28,314 28,675 Subsidies & Grants 7,894 8,607 7,923 8,245 8,573 8,937 9,338 9,749 10,203 10,702 11,211 Property Rentals Petrol Tax Interest Other Revenue 3,219 3,081 3,072 3,182 3,256 3,358 3,443 3,563 3,679 3,817 3,968 Dividends & Subvention Payments ,572 34,053 34,116 35,404 36,918 38,360 39,766 41,295 42,644 43,848 44,906 Payments to Suppliers & Employees 18,030 19,747 19,999 20,784 20,966 21,498 22,322 22,955 23,598 24,611 25,282 Elected Members Interest on Borrowings 3,102 3,009 3,301 3,544 3,480 3,396 3,300 3,187 2,969 2,724 2,472 GST Received/Paid ,251 1,420 1,395 1,438 1,680 1,733 1,724 1,751 22,172 23,333 24,461 25,834 26,135 26,573 27,333 28,110 28,607 29,354 29,818 Net Operating Cash Flows 10,400 10,720 9,655 9,570 10,783 11,787 12,433 13,185 14,037 14,494 15,088 Investing Activities Purchase of PPE 12,464 15,986 11,539 9,427 9,359 10,422 10,764 9,909 10,318 10,689 10,989 12,464 15,986 11,539 9,427 9,359 10,422 10,764 9,909 10,318 10,689 10,989 Sales of Assets Held for Sale Repayment of Advance to Community Groups + CCO Net Investing Cash Flows 12,385 15,897 11,449 8,587 9,269 10,332 10,673 9,818 10,227 10,597 10,897 Financing Activities Proceeds from Borrowings 7,185 10,377 6,994 4,217 3,686 3,745 3,440 1,833 1,390 1,303 1,009 7,185 10,377 6,994 4,217 3,686 3,745 3,440 1,833 1,390 1,303 1,009 Repayment of Borrowings 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 Net Financing Activities 1,985 5,177 1,794 (983) (1,514) (1,455) (1,760) (3,367) (3,810) (3,897) (4,191) Net Change in Cash Cash at Start of Period Cash at End of Period

17 Prospective Statement of Reserve Fund Movements for the years ending 30 June $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Opening Balance 4,669 5,625 4,290 3,264 2,542 2,596 3,145 3,977 5,459 7,303 9,210 Transfers to/from Reserve (1,013) (1,335) (1,026) (722) ,482 1,844 1,907 2,275 Closing Balance 3,656 4,290 3,264 2,542 2,596 3,145 3,977 5,459 7,303 9,210 11,485 Net Movement in Council Created Reserves over Ten years 5,860 Prospective Statement of Public Debt for the years ending 30 June $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Opening Balance 52,010 47,657 52,834 54,628 53,645 52,131 50,676 48,916 45,549 41,739 37,842 Loans Raised Loans Repaid 7,185 10,377 6,994 4,217 3,686 3,745 3,440 1,833 1,390 1,303 1,009 (5,200) (5,200) (5,200) (5,200) (5,200) (5,200) (5,200) (5,200) (5,200) (5,200) (5,200) Closing Balance 53,995 52,834 54,628 53,645 52,131 50,676 48,916 45,549 41,739 37,842 33,651 Loans raised or repaid in the Public Debt, Cashflow and Balance Sheet Prospective Statements are based on budgeted cashflow requirements, which includes working capital considerations, and do not equate to either the internal loans drawn or the external loan repayments shown in the Funding Impact Statement or the Summary of Estimated Revenue and Expenses Statement. Reconciliation of Summary Cost of Service Statement to Prospective Comprehensive Revenue and Expenses $000 s Net Surplus from Prospective Statement of Comprehensive Revenue and Expenses EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR ,566 2,901 2,226 2,429 3,325 3,867 4,274 4,775 5,368 5,483 5,845 Net Operating Cost from Estimated Revenue and Expense Statement 15,472 15,627 17,042 17,586 17,471 17,756 18,122 18,462 18,522 18,873 18,820 Plus Rates Revenue General Rates 3,373 3,434 3,624 3,684 3,810 3,924 4,054 4,263 4,412 4,514 4,617 UAGC 3,116 3,158 3,257 3,314 3,421 3,516 3,632 3,777 3,935 3,988 4,087 Targeted Rate 11,549 11,936 12,387 13,017 13,565 14,183 14,710 15,197 15,543 15,854 15,961 Net (Surplus)/Deficit (2,566) (2,901) (2,226) (2,429) (3,325) (3,867) (4,274) (4,775) (5,368) (5,483) (5,845) Variance

18 Funding Impact Statement Introduction Council is required under clause 15 of Schedule 10 of the Local Government Act 2002 (LGA) to adopt a Funding Impact Statement in relation to each year covered by the plan. Pages of this Plan show Council s Funding Impact Statement. The Funding Impact Statement provides a summary of Council s funding sources and how the funds are to be applied, as well as the detailed rate requirement for each financial year. The Funding Impact Statement represents the fiscal outcome from the Revenue and Financing Policy. The Revenue and Financing Policy is available on Council s website - Rates Remissions and Postponements Remissions Council has developed a rates remissions policy as per LGA (section 102 (3)(a) and 109) and LGRA (Section 85). Remissions categories include Properties Used Jointly as a Single Unit, Community Organisations, Financial Hardship, Organisations Providing Care for the Elderly, Clubs and Societies, New Subdivisions, Council Properties, Maori Freehold Land. The value of these remissions is $205,000 for the 2015/16 year. Postponements Definition of SUIP For these purposes a SUIP is defined as including any part of a rating unit used or inhabited by the owner or any other person who has the right to use or inhabit that part by virtue of tenancy, lease or other agreement. At a minimum, the land or premises forming the SUIP must be capable of actual habitation, or actual separate use. For the avoidance of doubt, a rating unit that has only one use (i.e. does not have separate parts or is vacant land) is treated as being one SUIP. 1. STATEMENT OF FUNDING SOURCES The table on the following page provides a summary of the funding sources for the long-term plan. Council s Revenue and Financing Policy and work programmes form the basis for the funding forecasts. The table is produced on a GST exclusive basis. 2. FUNDING CAP FOR UNIFORM CHARGES Section 21 of the Local Government (Rating) Act 2002 requires that revenue from certain rates must not exceed 30% of total rates revenue. Those rates include Uniform Annual General Charges and Targeted Rates that are set on a uniform basis. Council is not in breach of the Funding Cap over the life of the LTP. The uniform charges for 2015/16 are 20% of the total rates revenue. For the remaining 9 years of the long term plan the funding cap is an average of 21%. Under the Policy on Remission of Rates, Council will not offer any permanent postponements of rates. Separately Used or Inhabited Part of a Rating Unit (SUIP) The Council has resolved that the basis of calculating liability for the Uniform Annual General Charge (UAGC) and for certain targeted fixed rates (TFRs), will be the number of separately used or inhabited parts (SUIPs) of rating units. Council sets TFRs in all rating areas of the District on a SUIP basis for provision of: Water Supplies Sewerage Systems Solid Waste Management Solid Waste Collection Unsubsidised Roading Aquatic Centre Marokopa Community Centre Rural Stormwater 101

19 STATEMENT OF FUNDING SOURCES $000 s EAP YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR Targeted Rates and Service Charges Sewerage 2,185 2,228 2,279 2,376 2,486 2,604 2,657 2,679 2,653 2,670 2,722 Water 1,531 1,658 1,792 1,961 2,105 2,247 2,427 2,508 2,600 2,668 2,692 Metered water rates Targeted Services District Development Rate Piopio Retirement Village Contribution Roads and Footpaths 5,399 5,547 5,666 5,819 5,890 6,023 6,127 6,245 6,406 6,495 6,531 Solid Waste Management ,007 1,107 1,219 1,225 1,252 1,226 Solid Waste Collection Stormwater Marokopa Community Centre Total Targeted Rates and Service Charges 11,549 11,936 12,387 13,017 13,565 14,183 14,710 15,197 15,543 15,854 15,961 UAGC 3,116 3,158 3,257 3,314 3,421 3,516 3,632 3,778 3,936 3,988 4,087 General Rates 3,373 3,434 3,624 3,684 3,810 3,924 4,054 4,263 4,412 4,514 4,617 Total Rates 18,038 18,528 19,268 20,015 20,795 21,623 22,396 23,238 23,890 24,356 24,665 Percentage Rate Increase 2.72% 3.99% 3.88% 3.90% 3.98% 3.57% 3.76% 2.81% 1.95% 1.27% Other Revenue Sources Subsidies 6,865 7,484 6,890 7,169 7,454 7,771 8,120 8,478 8,872 9,306 9,748 Interest Revenue Rates Penalties Revenue Fees and Charges 3,241 3,212 3,229 3,345 3,642 3,753 3,852 3,984 4,114 4,267 4,431 Total Other Revenue 10,569 11,166 10,600 10,977 11,550 11,991 12,453 12,959 13,499 14,104 14,729 Other Funding Sources Internal Loans Raised 3,451 5,591 2,587 1, ,575 1, Total Other Funding 3,451 5,591 2,587 1, ,575 1, Total Funding Sources 32,058 35,285 32,455 32,015 33,237 35,189 36,468 36,970 38,182 39,262 40,267 Operating Expenditure 26,033 26,793 27,642 28,563 29,021 29,747 30,575 31,421 32,021 32,977 33,549 Capital Expenditure (Including Corporate Support) 10,838 13,901 10,034 8,197 8,138 9,063 9,360 8,616 8,972 9,295 9,556 Loan Repayments 1,506 1,567 1,718 1,852 2,181 2,187 2,252 2,357 2,475 2,509 2,537 Reserve Transfers -6,319-6,976-6,939-6,597-6,103-5,808-5,719-5,424-5,286-5,519-5,375 Total Funding Used 32,058 35,285 32,455 32,015 33,237 35,189 36,468 36,970 38,182 39,262 40,267 *Note 1: Metered water revenue is now included in Targeted rates instead of Other Revenue Sources as it was previously and for accurate comparison EAP figures have been reclassified. 102

20 3.0 GENERAL RATE Description and Use The General Rate is assessed as a rate per $100 of capital value of every rating unit across the District. The General Rate is not set differentially. The rationale for assessing the General Rate using Capital Value is contained in the Revenue and Financing Policy. The General Rate will contribute to the funding of: Governance: Leadership and Investments Leased Reserves Other Land and Buildings District Libraries Aquatic Centre Arts Culture and Heritage Aerodrome Public Amenities Parks & Reserves Elderly Persons Housing Community Halls Cemeteries Community Support District Development Emergency Management Rural Fire Regulation Waste Minimisation Resource Management Requirement in 2015/16 (incl. GST) All rating units in the District Rate per $100 capital value Total Revenue Requirement ($000) , UNIFORM ANNUAL GENERAL CHARGE Description and Use Council will set a Uniform Annual General Charge (UAGC) per separately used or inhabited part of a rating unit under Section 15(1)(b) of the LGRA, across the District. The rationale for use of the UAGC is contained in the Revenue and Financing Policy. The UAGC will contribute to the funding of: Governance: Leadership and Investments Parks and Reserves District Libraries Aquatic Centre Arts, Culture and Heritage Other Land and Buildings Public Amenities Leased Reserves Elderly Persons Housing Community Halls Cemeteries Aerodrome Community Support Automobile Association Emergency Management Regulation Resource Management Waste Minimisation Subsidised Roading Requirement in 2015/16 (incl. GST) Uniform Annual General Charge All rating units in the district. 5.0 TARGETED RATES Description and Use Charge per SUIP Total Revenue Requirement ($000) $656 3,632 Targeted Rates are set on categories of land defined by some factor, such as geographic location or provision of service. The titles of Targeted Rate ( TR ) and Targeted Fixed Rate (TFR) are used by this Council. Targeted Fixed Rates are based on a uniform amount set per separately used or inhabited part of a rating unit (SUIP) or set per rating unit. Targeted Rates are assessed based on capital value. 5.1 Targeted Rates Differentiated on Location Council will use location (Schedule 2(6) LGRA) to define the land liable for the Targeted Services TFR, Piopio Sewerage TFR, Piopio Retirement Village Contribution TFR, Rural Stormwater TFR, Te Kuiti Urban Stormwater TFR and targeted rate, and the Marokopa Community Centre TFR. The following location definitions for the respective rating areas will apply: Te Kuiti Urban Rating Area Te Kuiti Urban and Periphery Rating Area Rural Rating Area Piopio Wider Benefit Rating Area (a) All rating units situated within the Te Kuiti Urban Ward as defined by the Basis of Election for the 2010 Triennial Elections. (Refer to Revenue and Financing Policy for further details) All rating units situated within a 5km radius, all around, from the Information Centre (deemed to be the centre of town), in Te Kuiti. (Refer to Revenue and Financing Policy for further details) All rating units situated within the Rural Ward as defined by the Basis of Election for the 2010 Triennial Elections. (Refer to Revenue and Financing Policy for further details) All rating units situated in the rural areas around Piopio Township (excluding Rating units/suips connected to the Piopio Sewerage System) that are deemed to indirectly benefit from the Piopio Sewerage reticulation network. (Refer to Revenue and Financing Policy for further details) Targeted Services TFR Description and Use Council will set a Targeted Services TFR per separately used or inhabited part of a rating unit in the District, differentiated by rating areas, to part fund the Unsubsidised Roading Activity and part fund the Aquatic Centre Activity. The rating areas for the purpose of assessing the Targeted Services TFR will be the Te Kuiti 103

21 Urban and Periphery Rating Area and Rating Units in the District not in the Te Kuiti Urban and Periphery Rating area. Requirement in 2015/16 (incl. GST) Targeted Services TFR Te Kuiti Urban and Periphery Rating Area Rating Units in the District not in the Te Kuiti Urban and Periphery Rating Area (b) Charge per SUIP Total Revenue Requirement ($000) $ $ Piopio Sewerage TFR - Piopio Wider Benefit Rating Area Council will set a TFR on every rating unit situated within the Piopio Wider Benefit Rating Area to assist the funding of the sewerage reticulation networks in Piopio. The rationale for use of this rate is contained in the Revenue and Financing Policy. Requirement in 2015/16 (incl. GST) Requirement in 2015/16 (incl. GST) Rural Stormwater TFR Charge per SUIP Total Revenue Requirement ($000) Rural Rating Area $17 61 (e) Te Kuiti Urban Stormwater TFR and Targeted Rate. Description and Use (i) Council will set a TFR per rating unit in the Te Kuiti Urban Rating Area to partly fund the Urban Stormwater Activity. (ii) Council will set a Targeted Rate to partly fund the Urban Stormwater Activity, to be assessed as a rate per $100 of Capital value on every rating unit in the Te Kuiti Urban Rating Area excluding those in respect of which there is a current resource consent to discharge stormwater into the Mangaokewa Stream, and so are not using any part of the urban reticulated stormwater or drainage network. Requirement in 2015/16 (incl. GST) Piopio Sewerage TFR Piopio Wider Benefit Rating Area (c) Charge Per Rating Unit Total Revenue Requirement ($000) $34 19 Piopio Retirement Village Contribution Council will set a TFR per rating unit situated within the Piopio Township and the Piopio Wider Benefit Rating Area to fund the support of the continued delivery of elderly housing accommodation services provided by the Piopio Retirement Trust Inc. through the remission of service charges. The rationale for use of this rate is contained in the Revenue and Financing Policy. Urban Stormwater TFR Te Kuiti Urban Rating Area Urban Stormwater Targeted Rate Te Kuiti Urban Rating Area (excluding rating units not using network) Charge per rating unit Total Revenue Requirement ($000) $ Rate per $100 Capital Value Total Revenue Requirement ($000) Requirement in 2015/16 (incl. GST) Piopio Retirement Village Contribution Piopio Wider Benefit Rating Area and Piopio Township (d) Charge Per Rating Unit Rural Stormwater TFR Description and Use Total Revenue Requirement ($000) $23 17 Council will set a TFR per separately used or inhabited part of a rating unit in the Rural Rating Area of the District to fund the Rural Stormwater Activity. 5.2 Marokopa Community Centre TFR Description and Use Council will set a TFR assessed per separately used or inhabited part of a rating unit within the defined Marokopa Community Centre Rating Area. (As contained in the Revenue and Financing Policy) Requirement in 2015/16 (incl. GST) Marokopa Community Centre TFR Marokopa Community Centre Rating Area Charge Per SUIP Total Revenue Requirement ($000) $

22 5.3 Water Rates Description and Use Council will set a TFR for Water Supply differentiated on the basis of supply area. The TFR is set per separately used or inhabited part of a rating unit within the relevant community, with liability calculated based on whether the SUIP is connected, or merely serviceable (Serviceable means the rating unit is within 100m of water main and practicably serviceable in the opinion of Council). Requirement in 2015/16 (incl. GST) Water Supply (TFR) Per connected SUIP Charge Per serviceable SUIP Total Revenue Requirement ($000) Te Kuiti $521 $261 1,079 Piopio $1,283 $ Benneydale $1,400 $ Mokau $1,400 $ Any rating unit situated in Te Kuiti, Piopio, Benneydale or Mokau that has been fitted with a water meter and / or is defined as having an extraordinary supply (in accordance with Council s Water Service s Bylaw) will be charged a targeted fixed rate per cubic metre of water consumed over and above an annual consumption of 292m3 per SUIP. Requirement in 2015/16 (incl. GST) Water Supply Rate 2015/16 Charge per cubic metre (including GST) above 292m 3 Te Kuiti $1.90 Piopio $4.20 Benneydale $7.40 Mokau $ Subsidy rate for Benneydale Water Supply Description and Use Council will set a TFR on every rating unit within the District. The rationale for use of this rate is contained in the Revenue and Financing Policy. 5.5 Subsidy rate for Mokau Water Supply Description and Use Council will set a TFR on every rating unit within the District. The rationale for use of this rate is contained in the Revenue and Financing Policy. Requirement in 2015/16 (incl. GST) Subsidy for Mokau Water Supply All Rating Units in the District 5.6 Sewerage Rates Description and Use Charge Total Revenue Requirement ($000) $5 23 Council will set a TFR to provide for the collection and disposal of sewage, differentiated on the basis of community supply area. The TFR is set per separately used or inhabited part of a rating unit within the community, with liability calculated based on whether the SUIP is connected to the sewerage network, or merely serviceable (Serviceable means the rating unit is within 30m of sewer reticulation and practicably serviceable in the opinion of Council). Requirement in 2015/16 (incl. GST) Sewerage TFR Per connected SUIP Charge Per serviceable SUIP Total Revenue Requirement ($000) Benneydale $1,100 $ Te Waitere $1,100 $ Te Kuiti $956 $478 1,620 Piopio $1,100 $ Trade Waste Contribution A Trade Waste Contribution TFR will be set per rating unit in the District in recognition of the contribution made to the social and economic well-being of the District by the large industrial users of the Te Kuiti Wastewater Network. The rationale for use of this rate is contained in the Revenue and Financing Policy. Requirement in 2015/16 (incl. GST) Subsidy for Benneydale Water Supply Charge Total Revenue Requirement ($000) Trade Waste Contribution All Rating Units in the District Charge Per rating unit Total Revenue Requirement ($000) $ All Rating Units in the District $

23 Sewerage rates for non-residential properties in Te Kuiti For all non-residential properties, Council will assess a Targeted Fixed Rate per SUIP set on a differential basis based on the following Categories Category 1 - All Businesses Category 2 - Education & Community Childcare, Places of Worship, Marae, Clubs and Societies and Emergency Services. This category consists of organisations that are generally deemed not for profit. For avoidance of doubt, Category 2 only covers properties with uses listed within this category and no others. Category 3 - Government Department use, Rest Homes and Hospitals. All non-residential SUIPs will be charged one base charge for up to four pans and per pan (Pan Charge) for every pan over and above this threshold on the following basis: Base Charge: Non-Residential Targeted Rate Base Charge per SUIP (up to 4 pans) Total Revenue Requirement ($000) Category 1 $ Category 2 $ Category 3 $ Pan Charge: Non-Residential Targeted Rate Number of pans Charge per pan Total Revenue Requirement ($000) Category 1 5th pan and $ over Category Pans $287 2 Over 10 $ Pans Category 3 5th pan and over $ Subsidy Rate for Te Waitere Sewerage Description and Use Council will set a TFR on every rating unit within the District. The rationale for use of this rate is contained in the Revenue and Financing Policy. Subsidy for Te Waitere Sewerage All rating units in the District Charge Total Revenue Requirement ($000) $ Subsidy Rate for Benneydale Sewerage Description and Use Council will set a TFR on every rating unit within the District. The rationale for use of this rate is contained in the Revenue and Financing Policy. Subsidy for Benneydale Sewerage All rating units in the District Charge 5.10 Roads and Footpaths Rate Description and Use Total Revenue Requirement ($000) $11 52 Council will set a Roads and Footpaths Rate as a rate per $100 of capital value across the District to part fund Subsidised Roading (part of Roads and Footpaths Activity). Rationale for use of the rate is contained in the Revenue and Financing Policy. Requirement in 2015/16 (incl. GST) District Roads and Footpaths Rate All rating units in the District Rate per $100 Capital Value Total Revenue Requirement ($000) ,380 The rationale for the use of this rate is contained in the Revenue and Financing Policy. 106

24 5.11 Solid Waste Collection Description and Use Council will set a TFR per separately used or inhabited part of a rating unit to which Council provides a kerbside collection and recycling service to fund the cost of the services. Council operates kerbside collection and kerbside recycling in Te Kuiti, Piopio, Mokau and (part of) Waitomo townships. Requirement in 2015/16 (incl. GST) Solid Waste Collection (TFR) Charge per SUIP Total Revenue Requirement ($000) Te Kuiti $ Waitomo $75 42 Piopio $ RATES PAYMENTS Pursuant to Section 24 of the Local Government (Rating) Act 2002, rates for the financial year commencing 1 July 2015 will be payable in four equal instalments with the due dates for payment being: 1st Instalment 2nd Instalment 3rd Instalment 4th instalment 31 August 2015 (Monday) 30 November 2015 (Monday) 29 February 2016 (Monday) 31 May 2016 (Tuesday) Note The due date for payment of each instalment is the last working day in each of the months specified above. Rates payments will be allocated to the oldest debt first. Penalties Pursuant to sections 57 and 58 of the Local Government (Rating) Act 2002, Council may apply penalties as follows: Mokau $ Solid Waste Management Description and Use Council will set a TFR to part fund the activity of Solid Waste Management. This TFR will be set per separately used or inhabited part of a rating unit District wide. Requirement in 2015/16 (incl. GST) Solid Waste Management (TFR) All rating units in the District Charge per SUIP Total Revenue Requirement ($000) $ (a) (b) A penalty charge of 10 percent (10%) on any part of an instalment that has been assessed for the financial year commencing 1 July 2015 and which remains unpaid after 5pm on the due date for payment of that instalment, to be added on the penalty dates below: Instalment 1 2 September 2015 Instalment 2 2 December 2015 Instalment 3 2 March 2016 Instalment 4 2 June 2016 A further penalty charge of 10 percent (10%) on any part of any rates assessed before 1 July 2015 that remains unpaid on 1 July 2015, to be added on 6 July District Development Rate Description and Use Council will set a District Development Rate as a rate per $100 of capital value, differentiated between Commercial and Industrial Businesses, and Rural Businesses, to part fund Economic Development, Visitor Information Centre, District and Regional Promotion and Event Co-ordination. Refer to the Revenue and Financing Policy for details. Requirement in 2015/16 (incl. GST) District Development Rate Commercial and Industrial Businesses Rate per $100 Capital Value Total Revenue Requirement ($000) Rural Businesses

25 Rates Example 2014/15 (Including GST) Capital Value $ as at September 2012 Te Kuiti Residential Te Kuiti Commercial Te Kuiti Wider Rating Area Waitomo Commercial Benneydale Residential Piopio Residential Piopio Wider Rating Area Mokau Residential Drystock Rural Dairy Farm Rural 170, , ,000 1,100,000 44, , , ,000 3,075,000 5,550, / / / /15 (Three Parts) 2014/ / / / / /15 (Two Parts) Uniform Annual General Charge (UAGC) , ,300 General Rate , ,179 7,542 District Wide Roading Rate ,371 2, ,690 12,075 Targeted Services Rate (Urban) Targeted Services Rate (Rural) District Development Rate - Commercial District Development Rate - Rural Business Subsidy Rate for Te Waitere Sewerage Subsidy Rate for Benneydale Sewerage Subsidy Rate for Benneydale Water Stormwater Urban Fixed Charge Stormwater Urban Capital Value Stormwater (Rural) Water Supply , , Sewerage ,100 1, Piopio Wider Rating Area - Sewerage Piopio Retirement Village Contribution Te Kuiti Trade Waste Contribution Solid Waste Management - District Solid Waste Collection & Recycling Total Rates 2014/15 3,328 3,225 3,319 6,703 3,524 3,560 2,262 3,378 11,916 21,

26 Rates Example 2015/16 (Including GST) Capital Value $ as at September 2012 Te Kuiti Residential Te Kuiti Commercial Te Kuiti Wider Rating Area Waitomo Commercial Benneydale Residential Piopio Residential Piopio Wider Rating Area Mokau Residential Drystock Rural Dairy Farm Rural 170, , ,000 1,100,000 44, , , ,000 3,075,000 5,550, / /16 (3 Pans) 2015/ /16 (Three Parts) 2015/ / / / / /16 (Two Parts) Uniform Annual General Charge (UAGC) , ,312 General Rate , ,241 7,655 District Wide Roading Rate ,404 2, ,853 12,368 Targeted Services Rate (Urban) Targeted Services Rate (Rural) District Development Rate - Commercial District Development Rate - Rural Business Subsidy Rate for Te Waitere Sewerage Subsidy Rate for Benneydale Sewerage Subsidy Rate for Benneydale Water Subsidy Rate for Mokau Water Stormwater Urban Fixed Charge Stormwater Urban Capital Value Stormwater (Rural) Water Supply ,400 1, , Sewerage ,100 1, Piopio Wider Rating Area - Sewerage Piopio Retirement Village Contribution Te Kuiti Trade Waste Contribution Solid Waste Management - District Solid Waste Collection & Recycling Proposed Total Rates 2015/16 3,417 3,473 3,403 6,913 3,551 3,880 2,338 3,425 12,218 22,204 Total Rates (Actual) 2014/15 3,328 3,225 3,319 6,703 3,524 3,560 2,262 3,378 11,916 21,701 Change (%) 2.7% 7.7% 2.5% 3.1% 0.8% 9.0% 3.4% 1.4% 2.5% 2.3% 109

27 Funding Impact Statements (Local Government (Financial Reporting and Prudence) Regulations 2014 The following information is presented for compliance with the Local Government (Financial and Prudence Reporting) Regulations 2014 and should not be relied upon for any other purpose than compliance with the Regulations. It is incomplete (in particular, the information presented does not include depreciation and internal transactions such as overheads) and it is not prepared in compliance with generally accepted accounting practice. Waitomo District Council Funding Impact Statement for Leadership and Investments EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 Sources of operating funding General rates, uniform annual general charges, rates penalties 2,391 2,429 2,587 2,713 2,861 2,944 2,955 3,087 3,170 3,190 3,303 Targeted rates Subsidies and grants for operating purposes Fees and Charges Internal Charges and overheads recovered 14,578 15,459 16,098 16,733 17,011 17,256 17,551 17,894 18,130 18,368 18,630 Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 17,107 18,040 18,840 19,574 20,199 20,536 20,852 21,338 21,668 21,939 22,329 Applications of operating funding Payments to staff and suppliers 7,341 7,626 7,898 8,216 8,117 8,292 8,626 8,717 8,982 9,372 9,509 Finance costs 3,049 2,964 3,256 3,499 3,435 3,351 3,255 3,142 2,924 2,679 2,427 Internal charges and overheads applied 6,697 7,287 7,473 7,665 7,839 8,040 8,238 8,465 8,691 8,930 9,182 Other operating funding applications Total applications of operating funding (B) 17,087 17,877 18,627 19,380 19,391 19,683 20,119 20,324 20,597 20,981 21,118 Surplus (deficit) of operating funding (A-B) ,014 1, ,211 Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves (333) (92) (83) (74) Increase (decrease) of investments Total applications of capital funding (D) ,091 1,149 1,036 1,290 Surplus (deficit) of capital funding (C-D) (20) (163) (213) (194) (808) (853) (733) (1,014) (1,071) (958) (1,211) Funding Balance ((A-B)+(C-D))

28 Waitomo District Council Funding Impact Statement for Community Service EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 Sources of operating funding General rates, uniform annual general charges, rates 2,972 3,118 3,171 3,089 3,112 3,192 3,393 3,511 3,701 3,755 3,817 penalties Targeted rates Subsidies and grants for operating purposes Fees and Charges Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 3,918 3,781 3,900 3,890 3,900 4,000 4,223 4,375 4,591 4,676 4,768 Applications of operating funding Payments to staff and suppliers 1,350 1,578 1,487 1,539 1,601 1,675 1,747 1,813 1,835 1,858 1,927 Finance costs Internal charges and overheads applied 1,651 1,651 1,722 1,821 1,867 1,912 1,962 2,030 2,078 2,122 2,171 Other operating funding applications Total applications of operating funding (B) 3,001 3,229 3,209 3,360 3,468 3,587 3,709 3,843 3,913 3,980 4,098 Surplus (deficit) of operating funding (A-B) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves Increase (decrease) of investments Total applications of capital funding (D) 1,616 1,350 1, Surplus (deficit) of capital funding (C-D) (917) (552) (691) (530) (432) (413) (514) (532) (678) (696) (670) Funding Balance ((A-B)+(C-D))

29 Waitomo District Council Funding Impact Statement for Community Development Sources of operating funding EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 General rates, uniform annual general charges, rates ,056 1,097 1,178 1,208 1,267 1,325 penalties Targeted rates Subsidies and grants for operating purposes Fees and charges Internal charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 1,050 1,078 1,144 1,217 1,291 1,379 1,435 1,549 1,585 1,668 1,748 Applications of operating funding Payments to staff and suppliers Finance costs Internal charges and overheads applied Other operating funding applications Total applications of operating funding (B) 1,092 1,242 1,314 1,312 1,363 1,415 1,457 1,543 1,560 1,620 1,678 Surplus (deficit) of operating funding (A-B) (42) (164) (170) (95) (72) (36) (22) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves (42) (171) (170) (95) (74) (36) (22) Increase (decrease) of investments Total applications of capital funding (D) (42) (124) (129) (53) (29) (36) (22) Surplus (deficit) of capital funding (C-D) (6) (25) (48) (70) Funding Balance ((A-B)+(C-D))

30 Waitomo District Council Funding Impact Statement for Regulation Sources of operating funding General rates, uniform annual general charges, rates penalties EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/ Targeted rates Subsidies and grants for operating purposes Fees and Charges Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) ,002 1,017 1,071 1,089 Applications of operating funding Payments to staff and suppliers Finance costs Internal charges and overheads applied Other operating funding applications Total applications of operating funding (B) ,041 1,058 Surplus (deficit) of operating funding (A-B) 120 (14) 21 (39) (15) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves 120 (14) 21 (39) (15) Increase (decrease) of investments Total applications of capital funding (D) 120 (14) 21 (39) (15) Surplus (deficit) of capital funding (C-D) (120) 14 (21) (26) (26) (27) (28) (30) (31) Funding Balance ((A-B)+(C-D))

31 Waitomo District Council Funding Impact Statement for Solid Waste Management EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 Sources of operating funding General rates, uniform annual general charges, rates penalties Targeted rates ,089 1,224 1,331 1,450 1,464 1,499 1,482 Subsidies and grants for operating purposes Fees and Charges 1, ,002 1,028 1,037 1,067 1,079 1,114 1,140 1,181 1,224 Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 1,797 1,749 1,817 1,947 2,145 2,310 2,435 2,590 2,636 2,713 2,734 Applications of operating funding Payments to staff and suppliers 1,162 1,171 1,191 1,234 1,257 1,303 1,343 1,384 1,425 1,493 1,535 Finance costs Internal charges and overheads applied Other operating funding applications Total applications of operating funding (B) 1,723 1,843 1,875 1,940 1,962 2,006 2,078 2,151 2,175 2,223 2,246 Surplus (deficit) of operating funding (A-B) 74 (94) (58) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves 4 (94) (62) Increase (decrease) of investments Total applications of capital funding (D) 905 (94) (32) ,140 1, Surplus (deficit) of capital funding (C-D) (74) (7) (183) (304) (357) (439) (461) (490) (488) Funding Balance ((A-B)+(C-D))

32 Waitomo District Council Funding Impact Statement for Stormwater Drainage Sources of operating funding EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 General rates, uniform annual general charges, rates penalties Targeted rates Subsidies and grants for operating purposes Fees and Charges Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) Applications of operating funding Payments to staff and suppliers Finance costs Internal charges and overheads applied Other operating funding applications Total applications of operating funding (B) Surplus (deficit) of operating funding (A-B) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves (185) (153) (36) (40) (65) (58) (61) (24) Increase (decrease) of investments Total applications of capital funding (D) Surplus (deficit) of capital funding (C-D) (169) (172) (172) (175) (178) (181) (185) (187) (232) (240) (199) Funding Balance ((A-B)+(C-D))

33 Waitomo District Council Funding Impact Statement for Resource Management EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 Sources of operating funding General rates, uniform annual general charges, rates penalties Targeted rates Subsidies and grants for operating purposes Fees and Charges Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) Applications of operating funding Payments to staff and suppliers Finance costs Internal charges and overheads applied Other operating funding applications Total applications of operating funding (B) Surplus (deficit) of operating funding (A-B) 10 (45) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves 10 (45) Increase (decrease) of investments Total applications of capital funding (D) 10 (45) Surplus (deficit) of capital funding (C-D) (10) 45 (19) (17) (12) (6) (5) (5) (13) (13) (1) Funding Balance ((A-B)+(C-D))

34 Waitomo District Council Funding Impact Statement for Sewerage EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 Sources of operating funding General rates, uniform annual general charges, rates penalties Targeted rates 2,185 2,228 2,279 2,376 2,486 2,604 2,657 2,679 2,653 2,670 2,722 Subsidies and grants for operating purposes Fees and Charges ,034 1,077 1,123 1,173 Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 3,012 3,056 3,143 3,269 3,410 3,562 3,651 3,713 3,730 3,793 3,895 Applications of operating funding Payments to staff and suppliers 948 1,147 1,143 1,194 1,275 1,338 1,366 1,417 1,446 1,507 1,612 Finance costs Internal charges and overheads applied 1,429 1,332 1,366 1,427 1,424 1,437 1,426 1,429 1,409 1,401 1,390 Other operating funding applications Total applications of operating funding (B) 2,377 2,479 2,509 2,621 2,699 2,775 2,792 2,846 2,855 2,908 3,002 Surplus (deficit) of operating funding (A-B) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets Increase (decrease) in reserves Increase (decrease) of investments Total applications of capital funding (D) 1, Surplus (deficit) of capital funding (C-D) (635) (577) (634) (648) (711) (787) (859) (867) (875) (885) (893) Funding Balance ((A-B)+(C-D))

35 Waitomo District Council Funding Impact Statement for Water Supply EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 Sources of operating funding General rates, uniform annual general charges, rates penalties Targeted rates 2,230 2,293 2,453 2,644 2,811 2,979 3,187 3,298 3,423 3,526 3,588 Subsidies and grants for operating purposes Fees and Charges Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 2,237 2,297 2,460 2,652 2,819 2,987 3,195 3,307 3,432 3,535 3,598 Applications of operating funding Payments to staff and suppliers 804 1,072 1,116 1,190 1,226 1,270 1,316 1,371 1,437 1,511 1,556 Finance costs Internal charges and overheads applied 1, ,115 1,223 1,242 1,260 1,281 1,274 1,273 1,260 1,257 Other operating funding applications Total applications of operating funding (B) 2,017 1,946 2,231 2,413 2,468 2,530 2,597 2,645 2,710 2,771 2,813 Surplus (deficit) of operating funding (A-B) Sources of capital funding Subsidies and grants for capital expenditure Development and financial contributions Increase (decrease) in debt 905 4,502 1, Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) 1,685 5,282 1, Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service 982 5,195 1, Capital expenditure - to replace existing assets Increase (decrease) in reserves (111) (25) Increase (decrease) of investments Total applications of capital funding (D) 1,905 5,633 1, Surplus (deficit) of capital funding (C-D) (220) (351) (229) (239) (351) (457) (598) (662) (722) (764) (785) Funding Balance ((A-B)+(C-D))

36 Waitomo District Council Funding Impact Statement for Roads and Footpaths Sources of operating funding General rates, uniform annual general charges, rates penalties EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/ Targeted rates 5,631 5,803 5,934 6,102 6,195 6,349 6,473 6,610 6,789 6,891 6,939 Subsidies and grants for operating purposes 2,857 3,267 3,374 3,517 3,656 3,816 3,995 4,171 4,369 4,591 4,810 Fees and Charges Internal Charges and overheads recovered Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 8,880 9,389 9,632 9,950 10,189 10,512 10,822 11,145 11,533 11,867 12,144 Applications of operating funding Payments to staff and suppliers 4,512 4,655 4,728 4,852 4,963 5,097 5,255 5,401 5,573 5,772 5,957 Finance costs Internal charges and overheads applied 1,622 1,997 2,040 2,131 2,140 2,145 2,131 2,116 2,079 2,034 1,989 Other operating funding applications Total applications of operating funding (B) 6,134 6,652 6,768 6,983 7,103 7,242 7,386 7,517 7,652 7,806 7,946 Surplus (deficit) of operating funding (A-B) 2,746 2,737 2,864 2,967 3,086 3,270 3,436 3,628 3,881 4,061 4,198 Sources of capital funding Subsidies and grants for capital expenditure 2,922 3,410 3,514 3,650 3,797 3,953 4,124 4,305 4,501 4,712 4,936 Development and financial contributions Increase (decrease) in debt Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) 3,293 3,598 3,871 4,014 4,169 4,334 4,514 4,705 4,912 5,135 5,371 Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service Capital expenditure - to replace existing assets 4,838 5,615 5,694 5,823 5,964 6,115 6,284 6,463 6,660 6,873 7,098 Increase (decrease) in reserves ,079 1,271 1,442 1,640 1,896 2,078 2,218 Increase (decrease) of investments Total applications of capital funding (D) 6,039 6,335 6,735 6,981 7,255 7,604 7,950 8,333 8,793 9,196 9,569 Surplus (deficit) of capital funding (C-D) (2,746) (2,737) (2,864) (2,967) (3,086) (3,270) (3,436) (3,628) (3,881) (4,061) (4,198) Funding Balance ((A-B)+(C-D))

37 Waitomo District Council Funding Impact Statement for Whole of Council Sources of operating funding EAP 2014/15 LTP 2015/16 LTP 2016/17 LTP 2017/18 LTP 2018/19 LTP 2019/20 LTP 2020/21 LTP 2021/22 LTP 2022/23 LTP 2023/24 LTP 2024/25 General rates, uniform annual general charges, rates penalties 6,899 7,002 7,302 7,430 7,676 7,897 8,156 8,527 8,851 9,024 9,244 Targeted rates Subsidies and grants for operating purposes Fees and Charges Interest and Dividends from Investments 11,549 11,937 12,386 13,020 13,565 14,183 14,710 15,196 15,543 15,854 15,960 2,857 3,269 3,376 3,519 3,658 3,818 3,997 4,173 4,371 4,594 4,813 3,310 2,983 3,078 3,189 3,266 3,367 3,454 3,575 3,690 3,828 3, Local authorities fuel tax, fines, infringement fees and other receipts Total operating funding (A) 24,797 25,390 26,344 27,333 28,540 29,651 30,713 31,879 32,876 33,736 34,446 Applications of operating funding Payments to staff and suppliers 17,068 18,367 18,632 19,321 19,552 20,146 20,843 21,424 21,997 22,883 23,456 Finance costs 3,074 2,989 3,281 3,524 3,460 3,376 3,280 3,167 2,949 2,704 2,452 Other operating funding applications Total applications of operating funding (B) 20,142 21,356 21,913 22,845 23,012 23,522 24,123 24,591 24,946 25,587 25,908 Surplus (deficit) of operating funding (A-B) 4,655 4,034 4,431 4,488 5,528 6,129 6,590 7,288 7,930 8,149 8,538 Sources of capital funding Subsidies and grants for capital expenditure 3,802 4,190 3,514 3,650 3,797 3,953 4,124 4,305 4,501 4,712 4,936 Development and financial contributions Increase (decrease) in debt 3,451 5,592 2,587 1, ,575 1, Gross proceeds from sale of assets Lump sum contributions Other dedicated capital funding Total sources of capital funding (C) 7,353 9,963 6,177 4,748 4,766 5,605 5,820 5,156 5,372 5,593 5,888 Applications of capital funding Capital expenditure - to meet additional demand Capital expenditure - to improve the level of service 3,633 6,026 2, Capital expenditure - to replace existing assets 6,996 7,875 7,993 7,544 7,594 8,457 8,862 8,151 8,250 8,531 8,923 Increase (decrease) in reserves 1, ,040 2,155 2,671 3,050 3,830 4,329 4,447 4,870 Increase (decrease) of investments Total applications of capital funding (D) 12,008 13,997 10,608 9,236 10,294 11,734 12,410 12,444 13,302 13,742 14,426 Surplus (deficit) of capital funding (C-D) (4,655) (4,034) (4,431) (4,488) (5,528) (6,129) (6,590) (7,288) (7,930) (8,149) (8,538) Funding Balance ((A-B)+(C-D))

38 Statement of Reserve Funds The Council maintains reserves as a sub-part of its equity. Schedule 10(16) Local Government Act 2002 requires certain information on Reserve Funds to be included in the Council s Long-Term Plan. The following represents a summary of Reserve Funds over the period of the plan and provides information on: the purpose of the Reserve Fund the activity to which the fund relates the amount expected to be in the fund at: the commencement of the first year to which the Long Term Plan relates; and the end of the last year to which the Long Term Plan relates; and the amount expected to be deposited in the fund in the period to which the Long Term Plan relates; and the amount expected to be withdrawn from the fund in the period to which the Long Term Plan relates. 1. OPERATIONAL RESERVES Operational Reserves are created to hold short-term funding surpluses (or deficits) arising from the various activities of Council. This occurs when: Operating expenditure exceeds budget; Operating income is less than budget; or A combination of both. A balance held in an operational reserve forms part of the Council s funding considerations for a particular activity in each subsequent year s budget. For example, the balance in an operational reserve will determine whether more or less income is required in the subsequent year s budget to clear that balance. Council ensures that rates collected for a particular activity from an identified group of ratepayers are used only for that activity and for the benefit of that identified ratepayer group. 2. DEPRECIATION RESERVES The Council sets aside accumulated funds from rates in specific Depreciation Reserves to fund repayments on loans raised for capital expenditure and to maintain the service capacity and integrity of assets throughout their useful lives. Each major activity e.g. water, roading, wastewater, stormwater, solid waste, etc. has its own Depreciation Reserve so that the funds from each can be applied to the appropriate activity. Council ensures that funds accumulated for a particular activity from an identified group of ratepayers can only be used for that activity and for the benefit of that identified ratepayer group. The purpose of accumulating specific Depreciation Reserves is to ensure that Council s ability to provide services to the District s communities is maintained. 3. INVESTMENT REVALUATION RESERVES Council s investment activities include its subsidiary companies (Inframax Construction Ltd and Independent Roadmarkers Taranaki Ltd), Parkside Subdivision, 22 quarries throughout the District, Housing and Other Property and a small forestry holding at the Rangitoto Landfill site. Council is obliged to periodically review the value of its investment in each of these activities. Investment revaluation reserves are therefore created when the value of Council s investment either increases or decreases as a result of that revaluation. Revaluations of investments do not form part of the Revaluation Reserve shown in the Public Equity section of the Statement of Financial Position. The balances held in an investment revaluation reserve are not utilised in any way other than to recognise movements in the value of Council s investments. They would only be realised as a component of the surplus or deficit should Council ever resolve to dispose of a particular investment. 4. SPECIAL PURPOSE RESERVES There are two special purpose reserves: District Development Special Purpose Reserve: Funds were received from the Development King Country Trust in April 2012 with the intention of setting up a Waitomo District Economic Development Board (or similar entity) to assist with a more integrated strategic focus on sustainable delivery of economic development initiatives within the District. Waste Minimisation Special Purpose Reserve: Funds received from the Ministry for the Environment under Section 31 of the Waste Minimisation Act 2008 can only be spent on activities that promote or achieve waste minimisation and in accordance with Council s waste management and minimisation plan. This special purpose reserve is a net accumulation of levy monies received and expenditure on waste minimisation activities that meet the aforementioned purpose and Council approval. 121

39 Statement of Reserve Funds ($000 s) Operational Reserves (1) Governance: Leadership and Investments Projected Reserve Balance 30 June 2015 Forecast Reserve Deposits Forecast Reserve Withdrawals Reserve Balance 30 June 2025 Leadership (231) (754) 842 (143) Investments 3,298 (289) 351 3,360 Community Services 3,067 (1,043) 1,193 3,217 Parks & Reserves (159) (128) 185 (102) Housing & Other Property 154 (124) 0 30 District Libraries 235 (115) Swimming Pool 124 (59) 0 65 Arts, Culture and Heritage (139) (55) 55 (139) Aerodrome (99) 0 0 (99) Public Amenities (185) (181) 181 (185) Emergency Management (127) (80) 72 (135) Community Development (196) (742) 493 (445) Community Support (435) (126) Regulation (435) (126) Regulation 229 (156) Solid Waste Management 229 (156) Kerbside Collection (60) 0 0 (60) Transfer Stations (258) (495) Waste Minimisation (75) (10) 10 (75) Stormwater Drainage (393) (505) Te Kuiti Stormwater Rural Stormwater (136) 0 0 (136) Resource Management (110) 0 0 (110) District Plan Administration 11 (15) (30) (34) Sewerage and Treatment and Disposal of Sewage 11 (15) (30) (34) Te Kuiti Sewerage (1,141) (645) Te Waitere Sewerage (50) 0 0 (50) Benneydale Sewerage 227 (241) 12 (2) Piopio Sewerage (317) 0 0 (317) Water Supply (1,281) (241) 508 (1,014) Te Kuiti Water 561 (299) 927 1,189 Mokau Water 423 (247) Piopio Water 574 (302) Benneydale Water Provision of Roads and Footpaths 1,631 (845) 1,055 1,841 Subsidised Roads 2, ,478 Unsubsidised Roads (455) 0 0 (455) Corporate Support 2, ,023 Gratuities (83) 0 0 (83) Long Service Leave (35) 0 0 (35) Natural Disaster (426) 0 0 (426) (544) 0 0 (544) Total Operational Reserves 4,002 (3,673) 4,815 5,

40 Depreciation Reserves (2) Community Service Projected Reserve Balance 30 June 2015 Forecast Reserve Deposits Forecast Reserve Withdrawals Reserve Balance 30 June 2025 Parks & Reserves 156 (575) 396 (23) Elder Persons Housing (198) (230) 148 (280) Community Halls (749) (16) 16 (749) Other Land and Buildings (375) (840) 410 (805) Railway Building (1) (500) 155 (346) District Libraries (459) (599) 625 (433) Swimming Pool 85 (384) 174 (125) Arts, Culture and Heritage 114 (1,087) 469 (504) Aerodrome (4) (126) 76 (54) Public Amenities (91) (1,093) 1,026 (158) Community Development (1,522) (5,450) 3,495 (3,477) Visitor Information Centre (32) (59) 39 (52) Regulation (32) (59) 39 (52) Animal and Dog Control 24 (19) Solid Waste Management 24 (19) Landfill and Transfer Stations 253 (2,715) 2, Stormwater Drainage 253 (2,715) 2, Te Kuiti Stormwater (667) (1,720) 2,344 (43) Rural Stormwater (18) (45) 0 (63) Sewerage and Treatment and Disposal of Sewage (685) (1,765) 2,344 (106) Te Kuiti Sewerage (932) (6,851) 7,769 (14) Te Waitere Sewerage 4 (92) 9 (79) Benneydale Sewerage (108) (375) 365 (118) Piopio Sewerage (70) (685) 501 (254) Water Supply (1,106) (8,003) 8,644 (465) Te Kuiti Water (522) (3,517) 3,517 (522) Mokau Water 3 (549) Piopio Water (272) (856) 1,079 (49) Benneydale Water (133) (347) 183 (297) Provision of Roads and Footpaths (924) (5,269) 5,336 (857) Subsidised Roads (5,054) (32,935) 27,813 (10,176) Unsubsidised Roads 109 (1,192) 500 (583) Corporate Support (4,945) (34,127) 28,313 (10,759) Corporate Support (142) (3,586) 3,369 (359) Plant (349) (1,888) 1,875 (362) (491) (5,474) 5,244 (721) Total Depreciation Reserves (9,428) (62,881) 56,161 (16,148) 123

41 Investment Revaluation Reserves (3) Projected Reserve Balance 30 June 2015 Forecast Reserve Deposits Forecast Reserve Withdrawals Reserve Balance 30 June 2025 Governance: Leadership and Investments Forestry - Rangitoto Landfill Revaluation Community Services Land and Buildings Revaluation (265) 0 0 (265) Total Investment Revaluation Reserves (233) 0 0 (233) Special Purpose Reserves (4) Community Development Economic Development (16) 0 0 (16) Solid Waste Management Waste Minimisation 50 (282) 0 (232) Total Special Purpose Reserves 34 (282) 0 (248) Total Reserves (5,625) (66,836) 60,976 (11,485) Net Movement in All Council Created Reserves 5860 Estimated Cost of Service Statements Statement of Reserve Funds Activity Total Movement (To)/From Reserves Plus Depreciation Charged to Retained Earnings Less Internal Loan Repayments Transfer to Corporate Support Reserves Total Net Movement Opening Reserve Balance at 30 June 2015 Closing Reserve Balance at 30 June 2025 Total Net Movement in Reserves for Ten Years Governance: Leadership and Investments (3,003) 5,470 (2,387) (230) (150) 3,099 3, Community Services (2,449) 6,252 (1,599) 0 2,204 (1,983) (4,187) (2,204) Community Development (483) 59 (42) 0 (466) (483) (17) 466 Regulation (33) (86) Solid Waste Management 957 1,586 (2,682) 0 (139) (90) Stormwater Drainage (2,380) 1,960 (159) 0 (579) (795) (216) 579 Resource Management (34) (45) Sewerage and Treatment and Disposal of Sewage (5,195) 8,174 (3,887) 0 (908) (2,387) (1,479) 908 Water Supply (5,102) 7,543 (2,718) 0 (277) Provision of Roads and Footpaths Corporate Support [Reserves] (20,599) 34,538 (8,125) 0 5,814 (2,922) (8,736) (5,814) (1,035) (1,265) (230) (38,110) 65,602 (21,632) 0 5,860 (5,625) (11,485) (5,860) 124

42 Accounting Policies Statement of Responsibility The Long Term Plan was adopted by Council on 23 June The purpose of the plan is to provide a roadmap to the Council and community on the planned activities and expenditure of Council over the next ten years. The use of this information for purposes other than for which it is prepared may not be appropriate. The Council is responsible for the prospective financial statements presented, including the appropriateness of the underlying assumptions and related disclosures. The prospective financial statements have been prepared in compliance with PBE FRS 42 Prospective Financial Statements. The Council, who are authorised to do so, believe the assumptions underlying the Prospective Financial Statements are appropriate and as such, adopted the ten year plan on 23 June No actual financial results have been incorporated within the prospective financial statements. Statement of Accounting Policies Reporting Entity Waitomo District Council is a territorial local authority governed by the Local Government Act The primary objective of the Council is to provide goods or services for the community for social benefit rather than for making a financial return. Accordingly, for the purposes of financial reporting, Waitomo District Council is a public benefit entity. The financial information contained within the Long Term Plan may not be appropriate for purposes other than those described. Basis of Preparation The prospective financial statements are for Waitomo District Council (the Council) as a separate legal entity. Consolidated prospective financial statements comprising the Council and its controlled entities and associates have not been prepared. Statement of Compliance The prospective financial statements have been prepared in accordance with the requirements of the Local Government Act 2002, which includes the requirement to comply with New Zealand Generally Accepted Accounting Practice (NZ GAAP). The prospective financial statements have been prepared to comply with Public Benefit Entity Standards (PBE Standards) for a Tier 2 entity and disclosure concessions have been applied. The criteria under which an entity is eligible to report in accordance with Tier 2 PBE Standards are: Medium sizes entities (expenses between $2m and $30m) and that are not publicly accountable. The reporting periods covered for these prospective financial statements are the years ending 30 June 2016 to 30 June The prospective financial statement are presented in New Zealand dollars, rounded to the nearest thousand ($000), unless otherwise stated. The accounting policies set out below have been applied consistently to all periods presented in these prospective financial statements. Measurement Basis The measurement basis applied is historical cost, modified by the revaluation of land and buildings, certain infrastructural assets and financial instruments, investment property and forestry assets. The accrual basis of accounting has been used unless otherwise stated. For the assets and liabilities recorded at fair value, fair value is defined as the amount for which an item could be exchanged, or a liability settled, between knowledgeable and willing parties in an arm s-length transaction. For investment property, non-current assets classified as held for sale and items of property and plant and equipment all of which are re-valued, the fair value is determined by reference to market value. The market value of a property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm s-length transaction. Revenue Revenue comprises rates, revenue from operating activities, investment revenue, gains, finance and other revenue and is measured at the fair value of consideration received or receivable. Revenue may be derived from either exchange or nonexchange transactions. These are defined as: Exchange transactions Exchange transactions are transactions where the Council receives assets (primarily cash) or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services, or use of assets) to another entity in exchange. Non-exchange transactions Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, the Council either receives value from or gives value to another entity without directly giving or receiving approximately equal value in exchange. An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the Council satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction. 125

43 Specific accounting policies for major categories of revenue are outlined below: Rates Rates are set annually by resolution from the Council and relate to a particular financial year. All ratepayers are invoiced within the financial year for which the rates have been set. Rates revenue is recognised when rates are levied. Rates revenue is classified as non-exchange except for metered water rates which are classed as exchange revenue. Operating revenue The following categories (except where noted) are generally classified as transfers of non-exchange revenue. Grants, subsidies and reimbursements Grants and subsidies are initially recognised at their fair value where there is reasonable assurance that the payment will be received and all attaching conditions will be complied with. Grants and subsidies received in relation to the provision of services are recognised on a percentage of completion basis. Council receives government grants from NZTA which subsidises part of the Council s cost of maintaining local roading. These grants are recognised upon entitlement, which is when conditions pertaining to eligible expenditure have been fulfilled. Rendering of services Revenue from the rendering of services (eg building consent fees) is recognised by reference to the stage of completion for the transaction, based on the actual service provided as a percentage of the total services to be provided. Under this method, revenue is recognised in the accounting periods in which the services are provided. Within rendering of services most activities are at least partially funded by rates and therefore classified as nonexchange. Fines and penalties Revenue from fines and penalties (eg traffic and parking infringements, library overdue book fines, rates penalties) is recognised when infringement notices are issued or when the fines/penalties are otherwise imposed. Sale of goods The sale of goods is classified as exchange revenue. Sale of goods is recognised when products are sold to the customer and all risks and rewards of ownership have transferred to the customer. Investment revenue Investment revenue is classified as: Dividends Dividends are classified as exchange revenue and are recognised when the Council s right to receive a payment has been established. Investment property lease rentals Lease rentals (net of any incentives given) are recognised on a straight line basis over the term of the lease. Other revenue Specific accounting policies for major categories of other revenue are outlined below: Donated assets Where a physical asset is acquired for nil or nominal consideration, the fair value of the asset received is recognised as non-exchange revenue when the control of the asset is transferred to the Council. Finance revenue Interest revenue Interest revenue is exchange revenue and recognised using the effective interest rate method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument. Expenditure Expenditure is recognised when the Council has been supplied with the service or has control of the goods supplied. Grants and sponsorships Expenditure is classified as a grant or sponsorship if it results in a transfer of resources (eg cash or physical assets) to another entity in return for compliance with certain conditions relating to the operating activities of that entity. It includes any expenditure arising from a funding arrangement with another entity that has been entered into to achieve the objectives of the Council. Grants and sponsorships are distinct from donations which are discretionary or charitable gifts. Where grants and sponsorships are discretionary until payment, the expense is recognised when the payment is made. Otherwise, the expense is recognised when the specified criteria have been fulfilled. Interest Expense Interest expense is recognised using the effective interest rate method. All borrowing costs are expensed in the period in which they are incurred. Depreciation and Amortisation Depreciation of property, plant and equipment and amortisation of intangible assets are charged on a straight-line basis over the estimated useful life of the associated assets. 126

44 Income Tax Income tax expense on the surplus or deficit for the period comprises current tax expense and deferred tax. Income tax expense is recognised in the surplus or deficit except to the extent that it relates to items recognised in other comprehensive revenue and expenses or directly to equity, in which case it is recognised in other comprehensive revenue and expenses or directly to equity. Current tax is the amount of income tax payable based on the taxable profit for the current year plus any adjustments to income tax payable in respect of prior years. Current tax is calculated using rates that have been enacted or substantially enacted at balance date. Deferred tax is the amount of income tax payable or recoverable in future periods in respect of temporary differences and unused tax losses. Temporary differences are differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised only to the extent that it is probable that the taxable profits will be available against which the deductible temporary differences or tax losses can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of an asset and liability in a transaction that is not a business combination, and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is recognised on taxable temporary differences arising on investments in subsidiaries and associates, except where the Council can control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The amount of deferred tax provided is based on the tax rates which are expected to apply in the period the liability is settled or asset realised using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Council intends to settle its current tax assets and liabilities on a net basis. Cash and Cash Equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within Borrowings in Current Liabilities on the face of the prospective Statement of Financial Position. Inventories Inventories held for use in the production of goods and services on a commercial basis are valued at the lower of cost and net realisable value. The cost of purchased inventory is determined using the FIFO method. The amount of any write down from the loss of service potential or from cost to net realisable value is recognised in surplus or deficit. Other Financial Assets The Council classifies its financial assets into the following three categories: financial assets at fair value through surplus or deficit, loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Financial assets and liabilities are initially measured at fair value plus transaction costs unless they are carried at fair value through surplus or deficit in which case the transaction costs are recognised in the surplus or deficit. Purchases and sales of investments are recognised on trade-date, the date on which Council commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Council has transferred substantially all the risks or rewards of ownership. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used is the current bid price. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Council uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The three categories of financial assets are: 1. Financial Assets at Fair Value Through Surplus or deficit This category has two sub-categories: financial assets held for trading, and those designated at fair value through surplus or deficit at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. After initial recognition they are measured at their fair values. Gains or losses on re-measurement are recognised in the surplus or deficit. Derivative financial instrument assets are included in this class. 2. Loans and Receivables These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition they are measured at amortised cost using the effective interest method. Gains and losses when the asset is impaired or de-recognised are recognised in the surplus or deficit. Loans and receivables are classified as Debtors and Other Receivables in the Statement of Financial Position. 127

45 Loans made by the Council at nil or below-market interest rates are initially recognised at the present value of their expected future cash flows, discounted at the current market rate of return for a similar asset/investment. They are subsequently measured at amortised cost using the effective interest method. The difference between the face value and present value of expected future cash flows of the loan is recognised in the surplus or deficit. A provision for impairment of receivables is established when there is objective evidence that the Council will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted using the effective interest method. 3. Available for Sale Available for sale financial assets are those that are not classified in any of the other categories above. This category encompasses: Investments that the Council intends to hold long-term but which may be realised before maturity; and Shareholdings that the Council holds for strategic purposes. The Council s investment in Inframax Construction Limited is included in this category. After initial recognition these investments are measured at their fair value through surplus or deficit. Gains and losses arising from changes in fair value are recognised in other comprehensive revenue and expenses and accumulated as a separate component of equity in the available-for-sale revaluation reserve with the exception of impairment losses, interest calculated using the effective interest rate and foreign exchange gains and losses on monetary assets, which are recognised directly in surplus or deficit. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the available-for-sale revaluation reserve is reclassified from equity to the surplus or deficit (as a reclassification adjustment). Impairment of Financial Assets At each balance sheet date the Council assesses whether there is any objective evidence that a financial asset or group of financial assets is impaired. Any impairment losses are recognised in the surplus or deficit. An impairment exists if one or more events that have occurred since the initial recognition of the asset has an impact on the estimated future cashflows of the financial asset or the group of financial assets that can be reliably measured. Derivative Financial Instruments Derivative financial instruments are used to manage exposure to interest rate risks arising from financing activities. In accordance with its treasury policy, the Council does not hold or issue derivative financial instruments for trading purposes. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value at each balance date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and, if so, the nature of the item being hedged. The associated gains or losses of derivatives that are not hedge accounted are recognised in the surplus or deficit. The Council designates certain derivatives as either hedges of highly probable forecast transactions (cash flow hedge) or derivatives that do not qualify for hedge accounting. The Council documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Council also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedge transactions are highly effective in offsetting changes in fair values or cash flows of hedges items. The full fair value of a hedge accounted derivative is classified as non-current if the remaining maturity of the hedged item is more than 12 months, and as current if the remaining maturity of the hedges items is less than 12 months. Cashflow hedge The portion of the gain or loss on a hedging instrument that is determined to be an effective hedge is recognised in other comprehensive revenue and expenses and accumulated into the cashflow hedge reserve, and the ineffective portion of the gain or loss on the hedging instrument is recognised in the surplus or deficit as part of finance costs. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised in other comprehensive revenue and expenses are classified into the surplus or deficit in the same period or periods during which the asset acquired or liability assumed affects the surplus or deficit. However, if it is expected that all or a portion of a loss recognised in other comprehensive revenue and expenses will not be recovered in one or more future periods, the amount that is not expected to be recovered is reclassified to the surplus or deficit. If a hedging instrument expires or is sold, terminated, exercised, or revoked, or it no longer meets the criteria for hedge accounting, the cumulative gain or loss on the hedging instrument that has been recognised in other comprehensive revenue and expenses from the period when the hedge was effective will remain separately recognised in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, any related cumulative gain or loss on the hedging instrument that has been recognised in other comprehensive revenue and expenses from the period when the hedge was effective is reclassified from equity to the surplus or deficit. Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are immediately in surplus or deficit. 128

46 Payables under exchange transactions Payables under exchange transactions are recognised when the Council becomes obligated to make future payments resulting from the purchase of goods or services. Borrowings All loans and borrowings are initially recognised at their fair value net of transaction costs. After initial recognition, all borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Good and Service Tax (GST) All items in the Statement of Comprehensive Revenue and Expenses and Statement of Financial Position are stated exclusive of GST, except for receivables and payables, which are stated on a GST inclusive basis. Where GST is not recoverable as input tax then it is recognised as part of the related asset or expense. The Cash Flow Statement is stated inclusive of GST where applicable. The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the Statement of Financial Position. The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is classified as an operating cash flow in the Statement of Cash Flows. Provisions The Council recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that expenditures will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense. Financial Guarantee Contracts A financial guarantee contract is a contract that requires Council to make specified payments to reimburse the contract holder for a loss it incurs because a specified debtor fails to make payment when due. Financial guarantee contracts are disclosed as contingent liabilities. The amount of these contingent liabilities is equal to the loan balances guaranteed. Landfill Post Closure Costs The Council has a legal obligation under the resource consents for open and closed landfills to provide ongoing maintenance and monitoring services at the sites after closure. A provision for post closure costs is recognised as a liability when the obligation for post closure arises. The provision is a measure based on the present value of future cash flows expected to be incurred, taking into account future events including legal requirements and known improvements in technology. The provision includes all costs associated with landfill post closure. Amounts provided for landfill post closure are capitalised to the landfill asset where they give rise to future economic benefits to be obtained. Components of the capitalised landfill asset are depreciated over their useful lives. The discount rate of 6% is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to Council. Employee Benefits Employee Benefits are classified as: Short-Term Benefits Employee benefits that the Council expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at the rate expected to apply at the time of settlement. These include salaries and wages accrued up to balance date, annual leave earned to, but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave. The Council recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that the Council anticipates it will be used by staff to cover those future absences. Long-Term Benefits Retirement Gratuities Entitlements that are payable beyond twelve months, such as retirement gratuities have been calculated on an actuarial basis. The calculations are based on the likely future entitlements accruing to staff, based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement and contractual entitlements information, and the present value of estimated future cash flows. A discount rate of 6% and an inflation rate of 2% are used. The discount rate is based on the weighted average of Government interest rates for stock with terms to maturity similar to those of the relevant liabilities. The inflation factor is based on the expected long-term increase in remuneration for employees. 129

47 Leases Finance Leases A finance lease is a lease that transfers to the Council (as lessee) substantially all the risks and rewards incidental to ownership of an asset, whether or not title is eventually transferred. At the commencement of the lease term, the Council recognises finance leases as assets and liabilities in the Statement of Financial Position at the lower of the fair value of the leased item or the present value of the minimum lease payments. The amount recognised as an asset is depreciated over its useful life. If there is no certainty as to whether the Council will obtain ownership at the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. Operating leases as lessee An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Lease payments under an operating lease are recognised within surplus or deficit. Operating leases as lessor The Council lease investment properties and other land and buildings. Rental revenue is recognised on a straightline basis over the lease term. Property, Plant and Equipment Property, Plant and Equipment consists of operational assets, restricted assets, and infrastructural assets. Operational assets are tangible assets, able to be dealt with as part of the operating strategy and include land, buildings, furniture and fittings, computer hardware, plant and equipment, library books and motor vehicles. Infrastructural assets are the fixed utility systems providing an ongoing service to the community, but are not generally regarded as tradable. They include roads, water reticulation systems, refuse transfer stations, sewerage reticulation systems, stormwater systems, and land under roads. Restricted assets cannot be disposed of because of legal and other restrictions but provide a benefit or service to the community. These are mainly assets associated with reserves vested under the Reserves Act, endowments and other property held in Trust for specific purposes. Property, plant and equipment are shown at cost or valuation, less accumulated depreciation and impairment losses. Measurement Property, plant and equipment is recognised initially at cost, unless acquired for nil or nominal cost (eg vested assets), in which case the asset is recognised at fair value at the date of transfer. The initial cost of property, plant and equipment includes the purchase consideration (or the fair value in the case of vested assets), and those costs that are directly attributable to bringing the asset into the location and condition necessary for its intended purpose. Subsequent expenditure that extends or expands the asset s service potential is capitalised. Borrowing costs incurred during the construction of property, plant and equipment are not capitalised. After initial recognition, certain classes of property, plant and equipment are re-valued to fair value. Where there is no active market for an asset, fair value is determined by optimised depreciated replacement cost. Specific measurement policies for categories of property, plant and equipment are shown below: Operational Assets Land and Buildings An independent valuation of the Council s land and buildings was performed by Darroch Valuations, independent registered valuers, to determine the fair market value of the land and buildings at 30 June Land is valued on a fair value basis determined from market based evidence and conditions that prevailed as at 30 June All buildings have been valued on either a fair value or depreciated replacement cost basis. The Total Value for the Waitomo District Council Operational and Restricted Property Portfolio as at 30 June 2012 is reported at: Improvements Value (30 June 2012) $9,473,900 Land Value (30 June 2012) $11,120,400 Total Fair Value (30 June 2012) $20,594,300 Subsequent additions are at cost less accumulated depreciation. Library Books A valuation of the Council s library books was carried out as at 1 July 2004 by North Langley and Associates, independent registered valuers, to determine the Existing Use value of the library books. The value of the library books at 1 July 2004, subject to them having a good and marketable title, free from encumbrances, was determined as $492,800 (excl GST). Library books are no longer revalued. Subsequent additions are at cost less accumulated depreciation. Other operational assets Plant and equipment, motor vehicles, furniture and fittings, computers and finance leases are measured at depreciated historical cost and not revalued. 130

48 Infrastructural Assets Roads An independent valuation of the Council s roading infrastructure was performed as at 30 June 2014 by AECOM NZ Ltd, independent consulting engineers who have the appropriate qualifications and experience in the valuation of land transport infrastructural assets to determine the depreciated replacement cost of those assets. The valuation, which conforms to New Zealand Equivalent to International Accounting Standard (NZ IAS) 16 Property, Plant & Equipment was determined using the optimised depreciated replacement costs (ODRC) method as described in the NZ Infrastructure Asset Valuation and Depreciation Guidelines Version 2, The valuation is compliant with PBE IPSAS 17. The total value of Council s roading infrastructure at 30 June 2014 was reported at $229,807,000. Subsequent additions are at cost less accumulated depreciation. Sewerage, Water and Stormwater and Solid Waste A valuation of the Council s water utilities (water, wastewater, stormwater) was performed by AECOM NZ Ltd, independent consulting engineers who have the appropriate qualifications and experience in valuing community infrastructure, as at 30 June 2012 to determine the depreciated replacement cost of those assets. The valuation, was determined using the optimised depreciated replacement costs (ODRC) method. The total value of Council s water utilities as at 30 June 2012 is reported at: Asset Class Optimised Depreciated Replacement 30 June 2012 WASTE WATER Network $16,412,332 WATER Supply Network $13,216,842 Storm WATER Network $9,449,986 Solid Waste A valuation of the Council s solid waste infrastructure was performed by AECOM NZ Ltd, independent consulting engineers who have the appropriate qualifications and experience in valuing community infrastructure, as at 30 June 2014 to determine the depreciated replacement cost of those assets. The valuation, which conforms to New Zealand Equivalent to International Accounting Standard (NZ IAS) 16 Property, Plant & Equipment was determined using the optimised depreciated replacement costs (ODRC) method as described in the NZ Infrastructure Asset Valuation and Depreciation Guidelines Version 2, The valuation is compliant with PBE IPSAS 17. The total value of Council s solid waste infrastructure as at 30 June 2014 was reported at: Asset Class Optimised Depreciated Replacement Cost At 30 June 2014 Solid WASTE ASSETS $3,253,000 Subsequent additions are at cost less accumulated depreciation. Infrastructure Land An independent valuation of the Council s infrastructural land was performed by Darroch Valuations, independent registered valuers, to determine the fair market value of the land at 30 June The Total Value for the Waitomo District Council Operational Property Portfolio (Infrastructural Land) as at 30 June 2012 is reported at: Land Value (30 June 2012) Total Fair Value (30 June 2012) $1,254,500 $1,254,500 Restricted Assets Restricted assets cannot be disposed of because of legal or other restrictions and provide a benefit or service to the community. They are principally reserves vested under the Reserves Act. Darroch Valuations (independent Registered Valuers) valued restricted assets on 30 June 2012 at fair value based on market based evidence. Accounting for Revaluations The Council accounts for revaluations of property, plant and equipment on a class of asset basis. Any revaluation surpluses and deficits are recognised in the Other Comprehensive Revenue and Expenses and accumulated as a separate equity in the Revaluation Reserve for that class of asset. Where a revaluation of a class of assets results in a revaluation deficit, and the amount of the deficit is greater than an existing revaluation reserve, the revaluation deficit is recognised in the surplus or deficit. Any subsequent increase on revaluation that off-sets a previous decrease in value recognised in the surplus or deficit will be recognised first in the surplus or deficit up to the amount previously expensed, and then credited to the revaluation reserve for that class of asset. The carrying values of revalued items are reviewed at each balance date to ensure that those values are not materially different to fair value. If there is a material difference, then off-cycle asset classes are revalued. Accumulated depreciation at the revaluation date is eliminated so that the carrying amount after revaluation equals the revalued amount. While assumptions are used in all revaluations, the most significant of these are in infrastructure. For example where stormwater, wastewater and water supply pipes are underground, the physical deterioration and condition of assets are not visible and must therefore be estimated. Any revaluation risk is minimised by performing a combination of physical inspections and condition modelling assessments. 131

49 Subsequent Costs Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Disposals Gains and losses arising from the disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are recognised within surplus or deficit in the period the transaction occurs. When revalued assets are disposed, the amounts included in the asset revaluation reserves in respect of those assets are transferred to accumulated comprehensive revenue and expenses. Buildings Plant and Equipment Motor Vehicles Furniture and Fittings Computers Library books Archive books Infrastructural Assets years 2-15 years 5-15 years 2-5 years 2-5 years 3-7 years Not depreciated Infrastructural assets are depreciated on a straight line basis. The estimated useful lives are as follows: Roads Impairment The Council s assets are defined as cash generating if the primary purpose of the asset is to provide a commercial return. Non cash generating assets are assets other than cash generating. The carrying amounts of cash generating property, plant and equipment are reviewed at least annually to determine if there is an indication of impairment. Where an asset s, or class of asset s, recoverable amount is less than its carrying amount it will be reported at its recoverable amount and an impairment loss will be recognised. The recoverable amount is the higher of an item s fair value less costs to sell and value in use. Losses resulting from impairment are reported within surplus or deficit, unless the asset is carried at a revalued amount in which case any impairment loss is treated as a revaluation decrease and recorded within other comprehensive revenue and expenses. The carrying amounts of non-cash generating property, plant and equipment assets are reviewed at least annually to determine if there is any indication of impairment. Where an asset s, or class of asset s, recoverable service amount is less than its carrying amount it will be reported as its recoverable service amount and an impairment loss will be recognised. The recoverable service amount is the higher of an item s fair value less costs to sell and value in use. A non-cash generating asset s value in use is the present value of the asset s remaining service potential. Losses resulting from impairment are reported within surplus or deficit, unless the asset is carried at a revalued amount in which case any impairment loss is treated as a revaluation decrease and recorded within the other comprehensive revenue and expense. Depreciation Depreciation is provided on a straight-line basis on all property, plant and equipment other than land and land under roads and work in progress. Depreciation is calculated on a straight line basis, to allocate the cost or value of the asset (less any assessed residual value) over its estimated life. The estimated useful lives of the major classes of property, plant and equipment are as follows: Operational Assets Operational assets are depreciated on a straight line basis. The estimated useful lives are as follows: Top surface Base course Sub base Formation and running course Culverts timber and other Signs Street Lights and poles Bridges Footpath surface and base Water Reticulation Pipes, hydrant, valves Pump station, reservoirs Sewerage Reticulation Pipes and manholes Pump station Treatment plant Stormwater Systems Pipes, cesspits Flood Control Systems Refuse Systems Retaining walls Drainage Signs Kerb and channelling Truck wash and weighbridge 2-20 years years years Or not depreciated Not depreciated years years years years years years years years years years years years years years 30 years years 28 years 132

50 The landfill aftercare asset is depreciated over the life of the landfill based on the capacity of the landfill. The depreciation rates are applied at a component level and are dependent on the remaining useful life of each component. Variation in the range of lives is due to these assets being managed and depreciated by individual component rather than as a whole asset. Restricted Assets Restricted assets are depreciated on a straight line basis as follows: Buildings Capital Work in Progress years Capital work in progress is not depreciated. The cost of projects within work in progress is transferred to the relevant asset class when the project is completed and then depreciated. Intangible Assets Software Computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. The costs associated with maintaining computer software are recognised as an expense as incurred. The costs associated with the development and maintenance of the Council s website are recognised as an expense as incurred. Software is recorded at cost less any subsequent amortisation or impairment losses. Amortisation The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is de-recognised. The amortisation charge for each period is recognised in the surplus or deficit. The useful lives and associated amortisation rates for software have been estimated as follows: Computer software 2 to 5 years 20% to 50% Forestry Assets An independent valuation of Council s forestry assets was performed by North Langley and Associates, independent registered valuers, to determine the fair value less estimated point of sale costs at 30 June Non-current Assets Held For Sale Non-current assets held for sale are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, not through continuing use. This condition is regarded as met only when the sale is highly probable and the assets (or disposal group) is available for immediate sale in its present condition and the sale of the asset (or disposal group) is expected to be completed within one year from the date of classification. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment losses for write-downs of non-current assets held for sale are recognised in the surplus or deficit. Any increases in fair value less costs to sell are recognised up to the level of any impairment losses that have been previously recognised. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. An independent valuation of the Assets held for sale was performed by QV Asset and Advisory, independent registered valuers, to determine the fair market value of the investment properties. QV Asset and Advisory are members of the Property Institute of New Zealand and have the appropriate qualifications and recent experience in the valuation of properties within the Waitomo district. The valuation was prepared with reference to the Property Institute of New Zealand Professional Practice Standard 2009, and in particular New Zealand Valuation Guidance Note 1 (effective from 1 October 2009), International Valuation Standards effective from July 2011 (including June 2013 amendments) to IVS 300 Valuations for Financial Reporting (including changes that became effective 1 January 2012). Under IVS 300, all valuations must be assessed as at the date of inspection of the property, except where the valuation instructions are to assess the value at a retrospective date. Accordingly, the valuation date is the date of inspection. The valuers considered the use of the valuation for financial reporting at 30 June The fair value less costs to sell at 30 June 2014 was $956,000. Investment in Unlisted Shares Council has an interest (1.6%) in a Council Controlled Organisation (CCO), Local Authority Shared Services Limited. Council has no significant influences on operational or financial policies. As this investment is not traded on an active market, and quoted market prices of similar financial assets are not available, the fair value cannot be measured reliably. The investment is therefore measured at cost. Council has an interest (0.04%) in New Zealand National Mutual Riskpool. Council has no significant influences on operational or financial policies. As this investment is not traded on an active market, and quoted market prices of similar financial assets are not available, the fair value cannot be measured reliably. The investment is therefore measured at cost. Investment Property Investment property consists of miscellaneous housing properties. Investment properties are held primarily for capital growth, rental or similar revenue. Properties leased to third parties under operating leases are classified as 133

51 investment property unless the property is held to meet service delivery objectives, rather than to earn rentals or for capital appreciation. Investment property excludes those properties held for strategic purposes or to provide a social service. This includes properties which generate cash inflows as the rental revenue is incidental to the purpose for holding the property. Such properties include the Council s social housing assets, which are held within operational assets in property, plant and equipment. Borrowing costs incurred during the construction or upgrade of investment property are not capitalised. Investment property is measured initially at its cost, including transaction costs and subsequently measured at fair value, determined annually by an independent valuer. Any gains or losses are recognised within surplus or deficit. Investment property is not depreciated. The Total Value for the Waitomo District Council Investment Property as at 30 June 2014 is reported at: Cost Allocation Improvements Value (30 June 2014) $340,000 Land Value (30 June 2014) $295,000 Total Fair Value (30 June 2014) $635,000 The Council has derived the cost of service for each significant activity. Direct costs are expensed directly to the activity. Indirect costs relate to the overall costs of running the organisation and include staff time, office space and information technology costs. These costs are allocated to Council activities using appropriate cost drivers such as resource use, staff numbers and floor area. Related Parties Related parties arise where one entity has the ability to affect the financial and operating policies of another through the presence of control or significant influence. Related parties include key management personnel. Key management personnel include the Mayor and Councillors as directors, the Chief Executive and all members of the Executive Leadership Team as key advisors. The Mayor and Councillors are considered directors as they occupy the position of a member of the governing body of the Council reporting entity. Directors remuneration comprises any money, consideration or benefit received or receivable or otherwise made available, directly or indirectly, to a director during the reporting period. Directors remuneration does not include reimbursement of authorised work expenses or the provision of workrelated equipment such as cellphones and laptops. Related parties also include Council s subsidiary Inframax Construction Ltd and Inframax s subsidiary Independent Roadmarkers Taranaki Ltd, Council s investment in Local Authority Shared Services Ltd and NZ Local Government Insurance Company. Net assets/ equity Net assets or equity is the community s interest in the Council, and is measured as the difference between total assets and total liabilities. Net assets or equity is dis-aggregated and classified into a number of components to enable clearer identification of the specified uses of equity within Council. The components net assets or equity are: accumulated comprehensive revenue and expenses, other reserves and asset revaluation reserves Accumulated comprehensive revenue and expenses Accumulated comprehensive revenue and expenses does not represent cash available to offset future rate increases, but rather represent the community s investment in publicly owned assets resulting from past surpluses. Other Reserves Restricted reserves are a component of net assets or equity generally representing a particular use to which various parts of net assets or equity have been assigned. Reserves may be legally restricted or created by the Council. Restricted reserves are those subject to specific conditions accepted as binding by the Council and which may not be revised by the Council without reference to the Courts or a third party. Transfers from these reserves may be made only for certain specified purposes or when certain specified conditions are met. Also included in restricted reserves are reserves restricted by Council decision. Transfers to and from these reserves are at the discretion of the Council. Council created reserves are a combination of depreciation reserves and transfers of Surplus or Deficit from operations. The purpose of the reserves is to maintain balances of funded depreciation for future renewal of assets and to hold revenue streams in separate balances as required by Council. Available for sale reserves consists of valuation gains associated with Council s investments. Hedging reserves comprise the effective portion of the cumulative net change in the fair value of derivatives designated as cash flow hedges. Asset Revaluation Reserves Asset revaluation reserves relates to the revaluation of property, plant and equipment to fair value. Prospective Statement of Cash Flows The Cash Flow Statement is prepared inclusive of GST. For the purpose of the Cash Flow Statement cash means cash balances on hand, held in bank accounts, demand deposits and other highly liquid investments in which the Council invests as part of its day-to-day cash management net of bank overdrafts. Operating activities include cash received from all revenue sources of the Council and record the cash payments made for the supply of goods and services. Investing activities are those activities relating to the acquisition and disposal of non-current investments. Financing activities comprise activities that change the equity and debt capital structure of the Council. 134

52 Emissions Trading Scheme (ETS) The regulations for landfill methane emissions under the New Zealand Emissions Trading Scheme (NZ ETS) require waste disposal facility operators to surrender New Zealand Units (NZU s) by 31 May of each year to match the remission from 1 January to 31 December of the preceding calendar year. The cost of meeting ETS obligations is mandatory and Council is required to surrender NZU s for the landfill methane emissions associated with Rangitoto Landfill. NZU s that are purchased to meet these liabilities are recognised at cost and subsequently recognised at cost subject to impairment. Where there is an obligation to return units the expense and liability are recognised and are measured at the carrying value of units on hand plus the fair value of any additional units required. Judgements and Estimation The preparation of prospective financial statements using PBE standards requires the use of judgements, estimates and assumptions. Where material, information on the main assumptions is provided in the relevant accounting policy. The estimates and assumptions are based on historical experience as well as other factors that are believed to be reasonable under the circumstances. Subsequent actual results may differ from these estimates. Further information around assumptions used in the Long Term Plan can be found under the Planning Assumptions Section. The estimates and assumptions are reviewed on an ongoing basis and adjustments are made where necessary. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Landfill Aftercare Provision The Council has a legal obligation under resource consents for open and closed landfills to provide ongoing maintenance and monitoring service at the sites after closure. A provision for post closure costs is recognised as a liability when the obligation for post closure arises. The long term nature of the liability means that there are inherent uncertainties in estimating costs that will be incurred. Infrastructural Assets There are a number of assumptions and estimates used when performing discounted replacement cost valuations over infrastructural assets. These include: The physical deterioration and condition of an asset. For example the Council could be carrying an asset at an amount that does not reflect its actual condition. This is particularly so for those assets, which are not visible, for example underground stormwater, wastewater and water supply pipes. This risk is minimised by the Council performing a combination of physical inspections and condition modelling assessments of underground assets; Estimates are made when determining the remaining useful lives over which the asset will be depreciated. These estimates can be impacted by the local conditions, for example weather patterns and traffic growth. If useful lives do not reflect the actual consumption of the benefits of the asset, then the Council could be over or under estimating the annual depreciation charge recognised as an expense in the surplus or deficit. To minimise this risk the Council s infrastructural asset useful lives have been determined with reference to the NZ Infrastructural Asset Valuation and Depreciation Guidelines published by the National Asset Management Steering Group, and have been adjusted for local conditions based on past experience. Asset inspections, deterioration and condition modelling are also carried out regularly as part of the Council s asset management planning activities, which gives the Council further assurance over its useful life estimates. Infrastructural assets are revalued on a 3 yearly basis by an independent valuer. It has been assumed that any change in valuation will be in line with the assumed rates of inflation. Property, plant and equipment useful lives and residual values At each balance date the Council reviews the useful lives and residual values of its property, plant and equipment. Assessing the appropriateness of useful life and residual value estimates of property, plant and equipment requires the Council to consider a number of factors such as the physical condition of the asset, expected period of use of the asset by the Council, and expected disposal proceeds from the future sale of the asset. An incorrect estimate of the useful life or residual value will impact on the depreciable amount of an asset, therefore impacting on the depreciation expense recognised in the surplus or deficit, and carrying amount of the asset in the Statement of Financial Position. The Council minimises the risk of this estimation uncertainty with: physical inspection of assets; asset replacement programs; review of second hand market prices for similar assets; and analysis of prior asset sales. Council has not made significant changes to past assumptions concerning useful lives and residual values. Valuation of Investment in Inframax Construction Limited The investment of Inframax Construction Ltd was revalued at 30 June 2014 resulting in a gain in valuation of $2,600,000. The valuation report indicated a value between $2.6 million and $3.8 million for the investment. Council have conservatively recognised the investment at $2.6 million. It has been assumed that there has been no change in the value of the investment in Inframax Construction Ltd over the life of the plan. Estimating any obsolescence or surplus capacity of an asset; and; 135

53 Comparatives To ensure consistency with the current year, certain comparative information has been reclassified where appropriate. This has occurred: where classifications have changed between periods; where the Council has made additional disclosure in the current year, and where a greater degree of disaggregation of prior year amounts and balances is therefore required; and where there has been a change of accounting policy. Public Benefit Entity Financial Reporting Standard 42 Prospective Financial Statements (PBE FRS 42) The Council has complied with PBE FRS 42 in the preparation of these prospective financial statements. In accordance with PBE FRS 42, the following information is provided: (i) Description of the nature of the entity s current operation and its principal activities The Council is a territorial local authority, as defined in the Local Government Act The Council s principal activities are outlined within this Long Term Plan. (ii) Purpose for which the prospective financial statements are prepared It is a requirement of the Local Government Act 2002 to present prospective financial statements that span 10 years and include them within the Long Term Plan. This provides an opportunity for ratepayers and residents to review the projected financial results and position of the Council. Prospective financial statements are revised annually to reflect updated assumptions and costs. (iii) Bases for assumptions, risks and uncertainties The financial information has been prepared on the basis of best estimate assumptions as the future events which the Council expects to take place. The Council has considered factors that may lead to a material difference between information in the prospective financial statements and actual results. These factors, and the assumptions made in relation to the sources of uncertainty and potential effect, are outlined within this Long-Term Plan. (iv) Cautionary Note The financial information is prospective. Actual results are likely to vary from the information presented and the variations may be material. (v) Other Disclosures The prospective financial statements were authorised for issue on 23 June 2015 by Waitomo District Council. The Council is responsible for the prospective financial statements presented, including the assumptions underlying prospective financial statements and all other disclosures. The Long Term Plan is prospective and as such contains no actual operating results. 136

54 Financial Reporting and Prudence Benchmarks Long-term plan disclosure statement for period commencing 1 July What is the purpose of this statement? The purpose of this statement is to disclose the council s planned financial performance in relation to various benchmarks to enable the assessment of whether the council is prudently managing its revenues, expenses, assets, liabilities, and general financial dealings. The council is required to include this statement in its long-term plan in accordance with the Local Government (Financial Reporting and Prudence) Regulations 2014 (the regulations). Refer to the regulations for more information, including definitions of some of the terms used in this statement. Rates affordability benchmark The council meets the rates affordability benchmark if: its planned rates income equals or is less than each quantified limit on rates; and its planned rates increases equal or are less than each quantified limit on rates increases. Rates (income) affordability The following graph compares the council s planned rates with a quantified limit on rates contained in the financial strategy included in this long-term plan. The quantified limit is total rates revenue will be limited to an average of 75% of total operating expenditure. Total Rates Income/Total Operating Expenditure (%) 80% 75% 70% 65% 60% 55% 50% 2015/ / / / / / / / / /25 Year Quantified limit on rates income Proposed rates income (at or within limit) Proposed rates income (exceeds limit) 137

55 Rates (increases) affordability The following graph compares the council s planned rates increases with a quantified limit on rates increases contained in the financial strategy included in this long-term plan. The quantified limit is total rate increases will be limited to a cap of the Local Government Cost Index plus 2% (being 4.71% based on LGCI average over 10 years). Rate Increases (%) 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2015/ / / / / / / / / /25 Year Quantified limit on rates increase Proposed rates income (at or within limit) Proposed rates income (exceeds limit) Debt affordability benchmark The council meets the debt affordability benchmark if its planned borrowing is within each quantified limit on borrowing. The following graph compares the council s planned debt with a quantified limit on borrowing contained in the financial strategy included in this long-term plan. The quantified limit is total interest expense will not exceed 15% of total revenue. Total interest expense/total Revenue (%) 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 2015/ / / / / / / / / /25 Year Quantified limit on debt Budgeted interest expense (at or within limit) Budgeted interest expense (exceeds limit) 138

56 The following graph compares the council s planned debt with a quantified limit on borrowing contained in the financial strategy included in this long-term plan. The quantified limit is the total borrowings will not exceed 25% of total equity. 27.5% Total Borrowings/Total Equity (%) 25.0% 22.5% 20.0% 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2015/ / / / / / / / / /25 Year Quantified limit on debt Budgeted debt (at or within limit) Budgeted debt (exceeds limit) The following graph compares the council s planned debt with a quantified limit on borrowing contained in the financial strategy included in this long-term plan. The quantified limit is the total borrowings must not exceed 20% of total assets. 22.5% Total Borrowings/Total Assets (%) 20.0% 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2015/ / / / / / / / / /25 Year Quantified limit on debt Budgeted debt (at or within limit) Budgeted debt (exceeds limit) 139

57 The following graph compares the council s planned debt with a quantified limit on borrowing contained in the financial strategy included in this long-term plan. The quantified limit is net debt will not exceed 170% of total (cash) revenue. Net Debt/Total Cash Revenue(%) 180.0% 170.0% 160.0% 150.0% 140.0% 130.0% 120.0% 110.0% 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 2015/ / / / / / / / / /25 Year Quantified limit on debt Budgeted net debt (at or within limit) Budgeted net debt (exceeds limit) The following graph compares the council s planned debt with a quantified limit on borrowing contained in the financial strategy included in this long-term plan. The quantified limit is net interest will not exceed 20% of annual rates. 25.0% Net Interest/Annual Rates(%) 20.0% 15.0% 10.0% 5.0% 0.0% 2015/ / / / / / / / / /25 Year Quantified limit on debt Budgeted net interest (at or within limit) Budgeted net interest (exceeds limit) 140

58 Balanced budget benchmark The following graph displays the council s planned revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment) as a proportion of planned operating expenses (excluding losses on derivative financial instruments and revaluations of property, plant, or equipment). The council meets the balanced budget benchmark if its planned revenue equals or is greater than its planned operating expenses. Revenue/Operating Expenditure (%) 120.0% 110.0% 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 115.2% 116.8% 117.4% 111.5% 113.0% 114.0% 116.6% 110.8% 109.9% 108.1% 108.5% 2014/ / / / / / / / / / /25 Year Benchmark met Benchmark not met Essential services benchmark The following graph displays the council s planned capital expenditure on network services as a proportion of expected depreciation on network services. The council meets the essential services benchmark if its planned capital expenditure on network services equals or is greater than expected depreciation on network services. 300% 279% Capital Expenditure/Depreciation (%) 250% 200% 150% 100% 50% 160% 184% 152% 149% 146% 142% 142% 143% 142% 142% 0% 2014/ / / / / / / / / / /25 Year Benchmark met Benchmark not met 141

59 Debt servicing benchmark The following graph displays the council s planned borrowing costs as a proportion of planned revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment). Because Statistics New Zealand projects the council s population will grow more slowly than the national population is projected to grow, it meets the debt servicing benchmark if its planned borrowing costs equal or are less than 10% of its planned revenue. Borrowing Cost/Revenue (%) 12.5% 10.0% 7.5% 5.0% 2.5% 10.8% 10.0% 11.0% 11.4% 10.7% 10.0% 9.4% 8.7% 7.9% 7.0% 6.2% 0.0% 2014/ / / / / / / / / / /25 Year Benchmark met Benchmark not met In the first three years of the Long Term Plan, Council s borrowings cost increases due to additional borrowing required to fund the capital expenditure programme, in particular expenditure for Te Kuiti Water Upgrade. Council have taken into account the affordability of rates within the community and the long term nature of these assets and smoothed rates increases over this period. This has resulted in the benchmark not being met for the years 2016/17 to 2018/19 of the Long Term Plan. Councils projected total borrowing starts to reduce from 2018/19 onwards which reduces the debt servicing costs over this period. 142

60

61 Centennial Park Te Kuiti Section E: Policies and Strategies This section contains: Policy Statement on Council Controlled Organisations Policy on Appointment of Directors to Council Controlled Organisations Revenue and Financing Policy Summary of Significance and Engagement Policy Infrastructure Strategy Creating a better future with vibrant communities and thriving business. 143